##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
      Form 20-F
      o

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)
    OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934ORþ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)  OF
    THE SECURITIES EXCHANGE ACT OF 1934for the transition period
    from          to   Commission File Number 333-11910
      MAXCOM TELECOMUNICACIONES, S.A.
    DE C.V.
 (Exact name of Registrant as
    specified in its charter)
 MAXCOM TELECOMMUNICATIONS,
    INC.
 (Translation of
    Registrants name into English)
  UNITED MEXICAN STATES
 (Jurisdiction of incorporation
    or organization)
      Guillermo Gonzalez Camarena
    No. 2000
 Colonia Centro de Ciudad Santa
    Fe
 Mexico, D.F. 01210
 (Address of principal executive
    offices)
      Securities registered or to be
    registered pursuant to Section 12(b) of the Act:
 None
 Securities registered or to be
    registered pursuant to Section 12(g) of the Act:
 None
 Securities for which there is a
    reporting obligation pursuant to Section 15(d) of the
    Act:
 Series N Ordinary Participation
    Certificates
 Senior Step-up Notes due 2009
 Senior Notes due 2007
 133/4%
    B Series Bonds due 2007
  Indicate the number of outstanding shares of each of the
    issuers classes of capital or common stock as of the close
    of the period covered by the annual report.
  Series A shares, no par value,
    common voting stock


17,289,620Series B shares, no par value,
    common voting stock


16,611,595Series N shares, no par value,
    without voting rights


448,433,563   Indicate by check mark if the registrant is a well-known
    seasoned issuer, as defined in Rule 405 of the Securities
    Act
 Yes o     No þ
  If this report is an annual or transition report, indicate by
    checkmark if the registrant is not required to file reports to
    Section 13 or 15 (d) of the Securities Exchange Act of
    1934
 Yes o     No þ
  Indicate by check mark whether the registrant (1) has
    filed all reports required to be filed by Section 13 or
    15(d) of the Securities Exchange Act of 1934 during the
    preceding 12 months (or for such shorter period that the
    registrant was required to file such reports), and (2) has
    been subject to such filing requirements for the past
    90 days.
 Yes þ     No o
  Indicate by check mark whether the registrant is a large
    accelerated filer, an accelerated filer or an non-accelerated
    filer. See definition of accelerated and large accelerated
    filer in
    Rule 12b-2
    of the Exchange Act (Check one)
  Large accelerated
    filer  o     Accelerated
    filer  o     Non-accelerated
    filer þ
  Indicate by check mark which financial statement item the
    registrant has elected to follow:
 Item 17 o          Item 18 þ
  If this is an annual report, indicate by check mark whether
    the registrant is a shell company (as defined in
    Rule 12b-2
    of the Exchange Act)
 Yes o     No þ




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##### 



TABLE OF
    CONTENTS
  
  PagePART I


2ITEM 1.


IDENTITY OF
    DIRECTORS, SENIOR MANAGEMENT AND ADVISORS


2ITEM 2.


OFFER STATISTICS
    AND EXPECTED TIMETABLE


2ITEM 3.


KEY
    INFORMATION


3ITEM 4.


INFORMATION ON THE
    COMPANY


18ITEM 5.


OPERATING AND
    FINANCIAL REVIEW AND PROSPECTS


48ITEM 6.


DIRECTORS, SENIOR
    MANAGEMENT AND EMPLOYEES


71ITEM 7.


MAJOR SHAREHOLDERS
    AND RELATED PARTY TRANSACTIONS


76ITEM 8.


FINANCIAL
    INFORMATION


78ITEM 9.


THE OFFER AND
    LISTING


79ITEM 10.


ADDITIONAL
    INFORMATION


79PART II


101ITEM 11.


QUANTITATIVE AND
    QUALITATIVE DISCLOSURES ABOUT MARKET RISK


102ITEM 12.


DESCRIPTION OF
    SECURITIES OTHER THAN EQUITY SECURITIES


102PART III


102ITEM 13.


DEFAULTS, DIVIDEND
    ARREARAGES AND DELINQUENCIES


102ITEM 14.


MATERIAL
    MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
    PROCEEDS


102ITEM 15.


CONTROLS AND
    PROCEDURES


102ITEM 16A.


AUDIT COMMITTEE
    FINANCIAL EXPERT


102ITEM 16B.


CODE OF
    ETHICS


102ITEM 16C.


PRINCIPAL
    ACCOUNTANT FEES AND SERVICES


103ITEM 16D.


EXEMPTIONS FROM THE
    LISTING STANDARDS FOR AUDIT COMMITTEES


104ITEM 16E.


PURCHASE OF EQUITY
    SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS


104PART IV


104ITEM 17.


FINANCIAL
    STATEMENTS


104ITEM 18.


FINANCIAL
    STATEMENTS


105ITEM 19.


EXHIBITS


106GLOSSARY OF
    TELECOMMUNICATIONS TERMS


109EX-1.1: AMENDED AND RESTATED BY-LAWSEX-2.6: SENIOR NOTE INDENTUREEX-2.7: THIRD AMENDED AND RESATED SECURITYHOLDERS AGREEMENTEX-4.33: SUPPLY AND INSTALLATION AGREEMENTEX-12.1: CERTIFICATIONEX-12.2: CERTIFICATIONEX-13.1: CERTIFICATIONEX-13.2: CERTIFICATIONEX-99.1: COMPUTATION OF EARNINGS PER SHAREEX-99.2: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES   i




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
    competition in local services, data, Internet and VoIP services;
    our ability to service our debt;
    limitations on our access to sources of financing on competitive
    terms;
    significant economic or political developments in Mexico and the
    U.S.;
    changes in our regulatory environment, particularly developments
    affecting the regulation of the telecommunications industry;
    our need for substantial capital;
    general economic conditions, including the economic slow-down in
    the U.S.;
    the global telecommunications downturn;
    performance of financial markets and thus our ability to
    refinance our financial obligations when they come due;
    our history of operating losses;
    the risks associated with our ability to implement our growth
    strategy;
    customer attrition;
    technological innovations;
    currency exchange rates, including the Mexican Peso 
    U.S. dollar exchange rate; and
    changes in the policies of central banks
    and/or
    foreign governments. 1




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##### Table of Contents



Form 20-F, page G-1 Form 20-F
  011-52-55-5147-1125.
 PART I  ITEM 1.
    IDENTITY
    OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS    ITEM 2.
    OFFER
    STATISTICS AND EXPECTED TIMETABLE   2




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ITEM 3.
    KEY
    INFORMATION  A.
    Selected
    financial data    Normas
    de Información Financiera Bulletin B-10
  As of the Year Ended December 31,2002


2003


2004


2005


2006


2006(2)Unaudited(Thousands of constant December 31, 2006 pesos(1) and
    thousands of U.S. dollars(2))Statement of Operations
    Data:Mexican GAAPNet revenues


630,263



865,944



933,513



1,197,104



1,678,593



155,432Operating costs and expenses:Network operating costs


(244,706
)


(311,105
)


(329,439
)


(399,320
)


(652,452
)


(60,415
)Selling, general and administrative


(504,183
)


(436,002
)


(402,552
)


(487,250
)


(585,496
)


(54,215
)Depreciation and amortization


(373,454
)


(380,222
)


(360,071
)


(293,051
)


(289,582
)


(26,814
)Total operating costs and expenses


(1,122,344
)


(1,127,329
)


(1,092,062
)


(1,179,622
)


(1,527,530
)


(141,445
)Operating (loss) income


(492,080
)


(261,385
)


(158,549
)


(17,482
)


151,063



13,988Integral cost (income) of financing:Interest expense, net


(238,927
)


(29,457
)


(40,303
)


(101,060
)


(130,534
)


(12,087
)Exchange (loss) gain, net


(242,976
)


(195,814
)


(1,510
)


20,783



6,511



603Gain on net monetary position


118,326



86,136



92,650



22,985



20,724



1,919Total integral cost of financing


(363,577
)


(139,135
)


50,837



(57,292
)


(103,299
)


(9,565
)Other income (expense), net


3,108



(171
)


(851
)


9,355



(1,065
)


(99
)Special item














(15,988
)


(17,031
)


(1,577
)Tax


(9,110
)


(14,602
)


(30,143
)


(27,684
)


(57,875
)


(5,359
)Net (loss) income


(861,659
)


(415,292
)


(138,706
)


(74,127
)


(28,207
)


(2,612
)Earnings per share:Basic


(5.48
)


(1.62
)


(0.47
)


(0.18
)


(0.06
)


(0.006
)Dilutive


(5.48
)


(1.62
)


(0.47
)


(0.18
)


(0.06
)


(0.006
)U.S. GAAPOperating (loss) gain


(553,188
)


(297,721
)


(207,965
)


(5,678
)


(48,775
)


(4,516
)Net (loss) gain


(410,075
)


(428,337
)


1,271,427



178,890



12,009



1,112Earnings per share:Basic


(2.61
)


(1.67
)


4.34



0.44



0.03



0.003Dilutive


(2.61
)


(1.67
)


4.34



0.44



0.03



0.003 3




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As of the Year Ended December 31,2002


2003


2004


2005


2006


2006(2)Unaudited(Thousands of constant December 31, 2006 pesos(1) and
    thousands of U.S. dollars(2))Balance Sheet Data:Mexican GAAPCash and cash equivalents


136,094



47,205



64,710



232,479



712,508



65,976Restricted cash










5,973







22,612



2,094Working capital(3)


(21,161
)


15,041



(23,583
)


(121,819
)


28,029



2,613Restricted cash to long term










13,636



7,983







Frequency rights, net


122,797



108,886



101,368



89,592



85,172



7,887Telephone network systems and
    equipment, net


1,867,703



1,738,864



1,856,138



2,167,216



3,042,816



281,755Preoperating expenses, net


240,350



203,161



165,036



127,262



94,777



8,776Intangible assets, net


500,884



442,080



393,665



315,830



322,371



29,851Labor obligations upon retirement














15,398



14,522



1,345Rent deposits and other assets


34,801



31,848



22,488



10,927



22,069



2,044Total assets


3,114,084



2,796,601



2,864,009



3,287,790



4,882,375



452,093Long-term liabilities


2,170,268



2,289,767



739,370



919,368



1,813,918



167,963Total liabilities


2,407,963



2,504,607



1,160,491



1,431,640



2,687,949



248,896Capital stock


1,982,227



1,982,227



2,602,328



2,855,853



3,206,932



296,952Additional paid-in capital


494



1,660



931,791



228,524



243,927



22,587Accumulated deficit


(1,276,602
)


(1,691,894
)


(1,830,600
)


(1,228,227
)


(1,256,433
)


(116,342
)Total shareholders equity
    (deficit)(6)


706,120



291,994



1,703,519



1,856,150



2,194,426



203,197Total number of shares


175,841,180



176,013,680



277,224,018



277,224,018



482,334,778



482,334,778U.S. GAAPLong-term liabilities


1,785,158



1,928,468



499,008



729,499



1,813,918



167,963Total Shareholders equity (deficit)


(3,259
)


(430,430
)


1,051,711



1,230,601



1,615,871



149,625Other Financial Data:Mexican GAAPCapital expenditures(4)


621,098



141,790



373,925



465,185



1,004,131



92,979Ratio of earnings to fixed
    charges(5)


















1.05



1.05Resources arising from (used in)
    operating activities


(400,002
)


(53,288
)


287,931



310,676



84,714



7,844Resources derived from financing
    activities


942,671



106,188



103,499



322,278



1,399,446



129,584Resources used in investing
    activities


(621,098
)


(141,790
)


(373,925
)


(465,185
)


(1,004,131
)


(92,979
)U.S. GAAPCash (used in) provided by
    operating activities


(454,521
)


19,242



151,306



487,583



(111,497
)


(10,324
)Cash provided (used in) by
    financing activities


717,354







150,189



146,893



1,471,223



136,231Cash used in investing activities


(477,043
)


(73,576
)


(257,581
)


(459,650
)


(872,105
)


(80,754
)Ratio of earnings to fixed
    charges(5)


2.95











2.92



1.55



1.55     (1)
    
    Pursuant to Mexican GAAP, financial data for all periods in the
    financial statements have, unless otherwise indicated, been
    restated in constant pesos as of December 31, 2006.
    Restatement into December 31, 2006 pesos is made by
    multiplying the relevant nominal peso amount by the inflation
    index for the period between the end of the period to which such
    nominal peso amount relates and December 31, 2006. The
    inflation index used in this annual report for 2001 figures is
    1.0440, for 2002 figures is 1.0570, for 2003 figures is 1.0398,
    for 2004 is 1.0519, for 2005 is 1.0333 and for 2006 is 1.0405.(2)
    
    Peso amounts were converted to U.S. dollars at the exchange
    rate of Ps.10.80 per U.S.$1.00 reported by the Federal Reserve
    Bank of New York as its noon buying rate for pesos on
    December 29, 2006. Such conversions 4




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are for the convenience of the reader and should not be
    construed as representations that the peso amounts actually
    represent such U.S. dollar amounts or could be converted
    into U.S. dollars at the rate indicated, or at all.(3)
    
    Working capital is defined as current assets (excluding cash and
    cash equivalents and restricted cash) less current liabilities
    (excluding short-term debt and current maturities of long-term
    debt, which includes interest payable).(4)
    
    Capital expenditures include frequency rights, telephone network
    systems and equipment, intangible assets and other assets.
    Investing activities in the consolidated statements of changes
    in financial position are net of dispositions.(5)
    
    Our earnings were insufficient to cover fixed charges for the
    periods 1998 through 2005. Fixed charges include interest
    expense, capitalized interest and the portion of operating lease
    rental expense that represents the interest factor. The fixed
    charge coverage deficiency under Mexican GAAP was
    Ps.852.7 million in 2002, Ps.400.0 million in 2003,
    Ps.108.0 million in 2004 and Ps.46.0 million in 2005.
    Under U.S. GAAP, the fixed charge coverage deficiency under
    U.S. GAAP was Ps.401.2 million in 2002 and
    Ps.413.5 million in 2003.(6)
    
    During 2006, the company applied Staff Accounting Bulletin, or
    SAB, No. 108, Considering the Effects of Prior Year
    Misstatements when Quantifying Misstatements in Current Year
    Financial Statements. SAB No. 108 permits
    existing public companies to initially apply its provisions
    either by (i) restating prior financial statements as if
    the dual approach has always been applied or
    (ii) recording the cumulative effect of initially applying
    the dual approach as adjustments to the carrying
    values of assets and liabilities as of January 1, 2006,
    with an offsetting adjustment recorded to the opening balance of
    retained earnings. We elected to record the effects of applying
    SAB No. 108 using the cumulative effect transition
    method. The initial application of this guidance represented a
    reduction in the U.S. GAAP retained earnings of the company
    as of January 1, 2006 of Ps.6.8 million (see
    note 22 to the financial statements).  EXCHANGE
    RATES
    Noon Buying Rate(1)Period End


Average(2)


High


Low2002


10.43



9.75



10.43



9.002003


11.24



10.85



11.41



10.112004


11.15



11.31



11.63



10.802005


10.63



10.87



11.41



10.412006


10.80



10.91



11.46



10.43December 2006










10.99



10.77January 2007










11.09



10.77February 2007










11.16



10.92March 2007










11.18



11.01April 2007










11.03



10.92May 2007










10.93



10.74     (1)
    
    Source: Federal Reserve Bank of New York.(2)
    
    Represents the average rates for each period indicated,
    calculated by using the average of the exchange rates on the
    last day of each month during the period.   5




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B.
    Capitalization
    and indebtedness    C.
    Reasons
    for offer and use of proceeds    D.
    Risk
    factors  Risks
    Relating to Maxcom
  We may
    not be able to generate sufficient cash flows to meet our debt
    service obligations and implement our business
    plan.
    We
    will need additional financing to implement our business plan
    after 2007 and such capital may not be available to us on
    acceptable terms.
    
    fund our operations;
    enhance and expand the range of services we offer;
    maintain, expand or upgrade our network infrastructure; and
    respond to competitive pressures and potential strategic
    opportunities, such as investments and acquisitions.   6




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We may
    be unable to build out our network in a timely manner or without
    undue cost.
    
    municipal or regional political events or local rulings;
    our inability to obtain permits to use public rights of way;
    our inability to generate cash flow or to obtain future
    financing necessary for such buildout;
    unforeseen delays, costs or impediments relating to the granting
    of municipal and state permits for our buildout;
    delays or disruptions resulting from physical damage, power
    loss, defective equipment or the failure of third-party
    suppliers or contractors to meet their obligations in a timely
    and cost-effective manner; and
    regulatory and political risks relating to Mexico, such as the
    revocation or termination of our concessions, the temporary
    seizure or permanent expropriation of assets, import and export
    controls, political instability, changes in the regulation of
    telecommunications and any future restrictions or easing of
    restrictions on the repatriation of profits or on foreign
    investment.    The
    loss of key personnel could harm our business, results of
    operations and financial condition.
    We may
    not have sufficient personnel to grow as rapidly as we would
    like.
    We
    depend on Telmex for interconnection.
   7




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and/or Secretaría de
    Comunicaciones y Transportes Comisión
    Federal de Telecomunicaciones)
  If we
    do not successfully upgrade our accounting, billing, customer
    service and management information systems as new technology
    becomes available, our business, results of operations and
    financial condition could be materially and adversely
    affected.
    Our
    operations are dependent upon our ability to protect and
    maintain our network infrastructure.
    We
    could be negatively affected by by-pass
    international traffic.
  and/or
   8




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Our
    telecommunications network infrastructure has several
    vulnerabilities and limitations.
    
    physical damage;
    power loss;
    capacity limitations;
    software defects as well as hardware and software obsolescence;
    breaches of security, whether by computer virus, break-in or
    otherwise;
    failure to interconnect with carriers linking us with our
    customers;
    denial of access to our sites for failure to obtain required
    municipal or other regulatory approvals; and
    other factors which may cause interruptions in service or
    reduced capacity for our customers.    Our
    results may be negatively impacted by high levels of
    churn.
    
    customer delinquency;
    our limited coverage area that restricts our ability to continue
    providing service when a customer moves;
    our failure to meet service levels required by our customers;
    our failure to provide, efficiently or on competitive terms,
    other services demanded by our customers;
    promotional and pricing strategies of our competitors; and
    macroeconomic conditions in Mexico.    Our
    substantial indebtedness could have a material adverse effect on
    our financial condition, including our ability to fulfill our
    obligations under our existing senior secured notes and our
    ability to operate our business and implement our business
    plan.
   9




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
    making it more difficult for us to satisfy our obligations with
    respect to our indebtedness;
    requiring us to dedicate a substantial portion of our cash flow
    from operations to debt service payments, reducing the funds
    available for working capital, capital expenditures,
    acquisitions and other general corporate purposes;
    limiting our flexibility in planning for, or reacting to,
    changes in the telecommunications industry;
    limiting our ability to take advantage of opportunities for
    acquisitions and other business combinations;
    placing us at a competitive disadvantage compared to our less
    leveraged competitors;
    increasing our vulnerability to both general and
    industry-specific adverse economic conditions; and
    limiting our ability to obtain additional financing or obtain it
    on commercially reasonable terms, to fund future working
    capital, capital expenditures, acquisitions or other general
    corporate requirements and increasing our cost of borrowing.    The
    indenture governing our senior secured notes contains
    restrictions on our ability to operate our business and to
    pursue our business strategies. Our failure to comply with these
    covenants could result in an acceleration of our
    indebtedness.
    
    incur additional indebtedness;
    pay dividends or make other distributions on our capital stock
    or repurchase our capital stock or subordinated indebtedness;
    make investments or other specified restricted payments;
    create liens;
    enter into mergers, consolidations, sales of substantially all
    of our assets and other forms of business combinations;
    enter into change of control transactions;
    sell assets and subsidiary stock; and
    enter into transactions with affiliates.   10




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Risks
    Relating to the Mexican Telecommunications Industry
  We may
    face additional competition in the future from new market
    participants, which may result in lower prices for
    telecommunications services, lower margins and/or a loss of
    market share.
    Acuerdo de Convergencia de Servicios Fijos de Telefonía
    Local y Televisión y/o Audio Restringidos que se
    Proporcionan a través de Redes Públicas
    Alámbricas e Inalámbricas
  Comisión Federal de Electricidad
   11




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Rate
    pressure could have a material adverse effect on our business,
    results of operation and our financial condition.
    
    increased competition and focus by our competitors on increasing
    market share;
    recent technological advances that permit substantial increases
    in the transmission capacity of both new and existing
    fiber-optic networks, resulting in long-distance overcapacity
    and rate pressure;
    increased participation of traditional fixed-line competitors;
    the entrance of cable television operators into certain markets
    where we currently offer service; and
    the entrance of new competitors, such as broadcasting companies
    or the CFE.    If the
    Mexican government grants more concessions, the value of our
    concessions could be severely impaired.
    We
    could lose our concessions if we do not fully comply with their
    terms.
     12




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Fraudulent
    use of telecommunications networks increases our
    expenses.
    Rapid
    technological advances may require us to make significant
    capital expenditures to maintain and improve the competitiveness
    of our service offerings.
    We
    would be adversely affected if we are not able to renew our
    existing concessions or if the Mexican government revokes our
    concessions.
    Under
    Mexican law, our concessions could be expropriated or
    temporarily seized.
  Ley Federal de
    Telecomunicaciones
 13




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
    rights and obligations granted under the concessions to install,
    operate and develop public telecommunications networks may only
    be assigned with the prior authorization of the SCT;
    neither the concession nor the rights thereunder or the related
    assets may be assigned, pledged, mortgaged or sold to any
    government or country; and
    the Mexican government (through the SCT) may permanently
    expropriate any telecommunications concession and claim any
    related asset for reason of public interest or may temporarily
    seize the assets related to the concessions in the event of
    natural disasters, war, significant public disturbance or
    threats to internal peace or for other reasons relating to
    economic or public order.      Long-distance
    Calling Party Pays system could increase our costs and
    result in a loss of traffic.
    Foreign
    ownership restrictions may limit our ability to raise equity
    capital.
   14




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Risks
    Relating to Mexico
  Political
    conditions in Mexico may adversely affect our business, results
    of operations and financial condition.
    Political
    situation
  Tribunal Federal Electoral del Poder Judicial de la
    Federación
  Legal and
    regulatory situation
  Ley Federal de Radio
    y Televisión
  If
    Mexico experiences future economic crises, our business could be
    affected negatively.
    Economic
    situation
     15




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Changes
    to Mexican laws, regulations and decrees applicable to us could
    have a material adverse effect on our business, results of
    operations and financial condition.
      Exchange
    rate instability may have a material adverse effect on our
    business, results of operations, financial condition and the
    price of our securities.
        Developments
    in other countries may impact the price of our
    securities.
   16




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##### Table of Contents



We are
    subject to different corporate disclosure and accounting
    standards than U.S. companies.
    You
    may suffer a U.S. dollar shortfall if you obtain a judgment
    against us.
  Banco de México Diario Oficial de la Federación
  If we
    were to be declared bankrupt, holders of the senior secured
    notes may find it difficult to collect payment on the
    notes.
  Ley de Concursos
    Mercantiles en quiebra concurso mercantil Unidades de Inversión
  High
    inflation rates in Mexico may decrease demand for our services
    while increasing our costs.
    
    inflation can adversely affect consumer purchasing power,
    thereby adversely affecting consumer demand for our services and
    products; and
    to the extent inflation exceeds our price increases, our prices
    and revenues will be adversely affected in real terms.  High
    interest rates in Mexico could increase our financing
    costs.
  28-day
 17




---



##### Table of Contents



ITEM 4.
    INFORMATION
    ON THE COMPANY  A.
    History
    and development of the Company  sociedad anónima de capital variable
  (52) 55-5147-1111.
          B.
    Business
    overview  Industry
    Overview
       18




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##### Table of Contents



Market
    Liberalization
      Local
    Telephony Market
    30-year
    
    450 MHz, 1.9 GHz (Personal Communications Services, or
    PCS) and 3.4-3.7 GHz (fixed wireless local loop) nationwide
    and regional frequency bands;
    7, 15, 23 and 38 GHz frequency bands for nationwide
    point-to-point microwave transmission links; and
    10.5 GHz frequency band for regional point-to-multipoint
    microwave transmission service.  See
  last-mile
 19




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##### Table of Contents



Long-Distance
    Telephony Market
    30-year
    
    Axtel, S.A.B. de C.V.;
    Avantel, S.A. de C.V.;
    Alestra, S. de R.L. de C.V.;
    Bestel, S.A. de C.V.
    Iusatel, S.A. de C.V.; and
    Marcatel, S.A. de C.V.    Mobile
    Telephony Market
    
    Telcel with nationwide PCS and cellular concessions;
    Movistar (Telefónica Móviles) with nationwide PCS and
    regional cellular (regions 1 through 4) concessions;
    Grupo Iusacell, S.A.B. de C.V. with regional cellular (regions 5
    through 9) and nationwide PCS concessions;
    Unefon S.A.B. de C.V., an affiliate of Grupo Iusacell, S.A.B. de
    C.V., with a nationwide PCS concession; and
    Nextel de México, S.A. de C.V. (NII Holdings, Inc.) through
    enhanced specialized mobile radio licenses.   20




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##### Table of Contents



Mexican
    Market Trends
  Growing
    population and economy
  Consejo Nacional de Población
  Instituto Nacional de Estadística,
    Geografía e Informática
  Underserved
    telephony market
    Projected
    growth trends
    Voice Telephony.
  Data.
   21




---



##### Table of Contents



Mobile.
  Voice over Internet Protocol (VoIP).
  Internet Protocol Television (IPTV).
 22




---



##### Table of Contents



Business
  Overview
  dial-up
        last-mile
   23




---



##### Table of Contents



170-kilometer
      Competitive
    Strengths
    Innovative and fully bundled service
    offerings. dial-up
  Proven business model achieving high penetration rates in
    the cities in which we operate.
  Cost efficient, high-quality and highly capable
    technology.
 24




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##### Table of Contents



Valuable last mile ownership. last-mile
  Strong brand name and excellent customer perception for
    quality services.
  Demonstrated ability to establish successful strategic
    alliances.
  Strategy
    Increase penetration of profitable niche markets with
    unmet demand for telecommunication
    services.
  Seize wireline opportunity created by highly priced
    wireless offering.
 25




---



##### Table of Contents



per-minute
  Expand our network on a disciplined demand-driven, modular
    basis.
  Enhance residential penetration rates and customer average
    revenue per user through bundling of telecommunications and
    video service. e-mail average revenue per user
  Provide additional innovative products in bundled
    offerings.
  Maintain our service quality differentiation and
    focus.
  Overview
    of Our Services
   26




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##### Table of Contents



e-security
    Our
    Products
      
    LineaMax Residencial.  This service provides a
    high-quality wireline telephone line with value-added features
    available, including voice mail, call waiting, call forwarding,
    three-way calling, call blocking, speed dialing and unlisted
    numbers.
    Larga Distancia Max.  This product provides
    domestic and international long-distance services to those of
    our local telephony customers who require long-distance service.
    Approximately 97% of our local telephony customers also
    subscribe to Larga Distancia Max. We do not offer our
    long-distance service separately from our local telephony
    service.
    CentralMax.  This service provides customers in
    residential developments with all of the functions of a private
    branch exchange (PBX) using centrex technology (central
    functionality for simulating a PBX), without having to acquire
    and maintain equipment. It allows customers to communicate with
    the common areas of the development with four-digit internal
    calling. The features offered under this product include call
    waiting, call forwarding, three-way calling, direct inward
    dialing, direct outward dialing, intercom dialing, call
    transfer, speed dialing, call hold, call pick up, outgoing call
    blocking and distinctive ringing.
    I-line.  This is our VoIP service, which uses
    an analog-to-digital telephone adapter to allow any conventional
    telephone to access the telephone network through any broadband
    connection around the world.
    Internet Max.  This service uses a traditional
    telephone line and modem to provide
    dial-up
    Internet access at speeds of up to 56 Kbps. We provide this
    service to customers, regardless of whether they have a Maxcom
    telephone line.
    SpeediMax (ADSL).  This is our broadband
    Internet access service with speeds of 128, 256 and
    512 Kbps and also 1 and 2 Mbps using Asymmetric
    Digital Subscriber Line (ADSL) transmission technology over
    ordinary telephone lines.
    AsistelMax.  This service provides basic
    telephone medical and home assistance to our residential
    customers in case of emergency.    
    LineaMax Comercial.  This service is identical
    to LineaMax Residencial, except that it also includes multi-line
    hunting.
    CentralMax.  This service provides business
    customers with all of the functions of a private branch exchange
    using centrex technology, without having to acquire and maintain
    equipment. The features offered under this product include
    four-digit internal calling, call waiting, call forwarding,
    three-way calling, direct 27




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##### Table of Contents



inward dialing, direct outward dialing, intercom dialing, call
    transfer, speed dialing, call hold, call pick up, outgoing call
    blocking, single digit access to attendant and distinctive
    ringing. Optional solutions include voice mail,
    music-on-hold,
    multi-line hunting and operator services.  
    TroncalMax Digital.  This service provides
    digital trunks for business customers that need highly reliable
    access to and from the public telephone network through their
    existing Private Branch Exchange (PBX). This service is sold in
    groups of 10, 20 or 30 trunks. The groups can be configured with
    direct inward dial, direct outward dial, caller identification
    or main telephone number assignments.
    TroncalMax Analógica.  This service
    provides business customers with connectivity to their analog
    PBX or key systems. The features available with this product are
    multi-line hunting, caller identification and call barring.
    SpeediMax (ADSL).  This is our broadband
    Internet access service for small businesses with speeds of 128,
    256 and 512 Kbps and also 1 and 2 Mbps using
    Asymmetric Digital Subscriber Line (ADSL) transmission
    technology over ordinary telephone lines. ADSL provides a
    secure, dedicated link to the Internet or a companys
    internal data network.
    1-800 Numbers.This service is available to our customers
    interested in receiving toll-free calls into their call centers
    or businesses.
    Dedicated Internet Access.  This service offers
    Internet access at high speed within a clear channel access to
    the Internet backbone.
    Digital private lines.  This service provides
    highly reliable dedicated circuits between two or more physical
    locations.
    Hosted PBX.  This service provides our business
    customers with all of the functions of an Internet Protocol PBX
    (IP/PBX) using VoIP technology, without having to acquire and
    maintain expensive equipment. The features offered under this
    service include those of CentralMax as well as other Internet
    Protocol enhanced services such as web portal setup, click
    to dial, hosted directory and Microsoft Outlook
    integration.
    I-line.  This is our VoIP service, which uses
    an analog-to-digital telephone adapter to allow any conventional
    telephone to access the telephone network through a
    customers broadband connection. We market this service to
    customers who make and receive a significant volume of
    international and domestic long-distance calls. This service
    includes additional voice features such as call waiting, caller
    identification and voice mail.
    E-Security.  This
    service provides managed security including perimetral
    anti-virus, content filter and spyware solutions. Maxcom
    supplies all of the software and hardware equipment as an
    integrated solution for our customers.
    SOSMax.  This service provides preventive and
    corrective maintenance to our customers IT equipment.
    Audio Conference.  This service provides our
    business customers with operator-assisted and non-attendant
    teleconferencing services, with value-added features including
    recording of the conference, sound options, warning entry,
    password and
    e-mail
    notification.    Pricing
   28




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Our
    Markets
  Concession
    Areas
            Clusters
    and Single Sites
   29




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##### Table of Contents




    Identify clusters through market research. Our market research
    is designed to identify residential customers and small- and
    medium-sized businesses. Once we identify potential customers
    within the clusters, based on the marketing sales forecast we
    design the deployment of the access network to cover them. We
    perform a return on investment and profitability analysis for
    each cluster to assure that the investment made in such cluster
    meets our return benchmarks.
    Deploy clusters through the implementation of a sales plan for
    each cluster based on our network deployment schedule. We
    commence promoting our services at the same time we build our
    network. These coordinated and parallel efforts help reduce the
    time between network deployment and revenue generation.
    Fill in clusters by offering our services to all customers
    within the cluster. Marketing efforts are focused on achieving
    the highest penetration within our clusters.    Our
    Network
  Buildout
    Strategy
        Network
    Backbone
   30




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##### Table of Contents



57-kilometer
    Last-mile
    Connectivity
  last-mile Comisión Federal de Electricidad Compañía de Luz y Fuerza del Centro
  turn-up
  Switching
     31




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##### Table of Contents



Operational
    support systems
      
    offer a flexible, large selection of services;
    provide tailored service packages;
    quickly introduce products and services;
    deliver near real-time activation and disconnection;
    deliver a high quality of service;
    minimize activation errors; and
    provide accurate and timely billing services.    
    Spanish language support for invoices and documentation;
    a high degree of integration among all operational support
    systems components;
    flow-through of information, provisioning and service activation;
    capabilities to monitor, manage and resolve network problems;
    allowance for growth on a modular scalable basis; and
    support of administrative operations for financial controls.  ,
 32




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##### Table of Contents



Marketing
    and Sales
  General
    Sales
    and Distribution Channels
          Customer
    Service
    Centralized call center.
 33




---



##### Table of Contents



Walk-in center.
  Centralized trouble-shooting center.
    Credit,
    Billing and Collection
             34




---



##### Table of Contents



Competition
        Telmex
    Other
    Competitors
    last-mile
  IP-based
     35




---



##### Table of Contents



last-mile
        See
  Employees
  Sindicato Nacional de Trabajadores de
    Telecomunicaciones, Telefonía, Comunicaciones,
    Cibernética, Productos Eléctricos, Electrónicos,
    Similares y Conexos de la República Mexicana
  Legal
    Matters and Administrative Proceedings
   36




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##### Table of Contents



Comisión
    Federal de Electricidad (CFE) Litigation
  Comisión Federal de
    Electricidad 30-year
  30-year
  Lucent
    Technologies Claim
  prescripción
  Regulatory
    Framework
  Overview
  (Ley Federal de
    Telecomunicaciones Ley de Vías Generales de
    Comunicación Reglamento de Telecomunicaciones
    
    enacting regulations and technical standards for the
    telecommunications industry;
    ensuring that holders fulfill the terms of their concessions and
    permits;
    suspending operators without concessions;
    resolving interconnection controversies between
    competitors; and
    maintaining a registry of applicable rates.   37




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##### Table of Contents



Ley Federal de Radio y
    Televisión
  See fianzas
  Concessions
    and Permits
      
    the type and technical specifications of the network, system or
    services that may be provided;
    the allocated spectrum frequencies, if applicable;
    the geographical region in which the holder of the concession
    may provide the service;
    the required capital expenditure program;
    the term during which such service may be provided;
    the payment, where applicable, required to be made to acquire
    the concession, including, where applicable, the participation
    of the Mexican government in the revenues of the holder of the
    concession;
    the amount of the performance bond; and
    rights granted to and obligations imposed on the concession
    holder.   38




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##### Table of Contents



Ownership
    Restrictions
  (Ley Federal de Inversión
    Extranjera
  
    Mexican individuals; and
    Mexican corporations in which non-Mexicans own 49% or less of
    the full voting stock and that are not otherwise controlled by
    non-Mexicans, except in the case of concessions for cellular and
    PCS communications services, where foreign investment
    participation may exceed 49% of the voting stock with prior
    approval of the Mexican Foreign Investment Bureau of the Mexican
    Ministry of Economy (Secretaría de Economía).  certificados de
    participación ordinarios
  Transfer
    Termination
    
    expiration of its term;
    resignation by the concession holder or the permit holder;
    revocation; or
    dissolution or bankruptcy of the concession holder or the permit
    holder.    
    failure to exercise the rights of the concession within
    180 days of the grant;
    failure to provide interconnection services to other holders of
    telecommunications concessions and permits without reason;
    loss of the concession or permit holders Mexican
    nationality;
    unauthorized assignment, transfer or encumbrance of the
    concession or permit;
    unauthorized interruption of service;
    taking any action that impairs the rights of other
    concessionaires or permit holders;
    failure to comply with the obligations or conditions specified
    in the concession or permit (including making any necessary
    investments and capital expenditures); and
    failure to pay to the Mexican government its fee for the
    concession or, where applicable, its participation in the
    revenues of the holder of the concession. 39




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##### Table of Contents



Temporary
    Seizure
    Expropriation
      Rates for
    Telecommunications Services
    Comisión
    Federal de Competencia
  Our
    Concessions
    Local
    Telephony
   40




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##### Table of Contents




    basic local telephony;
    the sale or lease of network capacity for the generation,
    transmission or reception of signs, signals, writings, images,
    voice, sounds or other information of any nature;
    the purchase and lease of network capacity from other carriers,
    including the lease of digital circuits;
    value-added services;
    operator services;
    data, video, audio and video conference services, except for
    cable or other restricted television, continuous music or
    digital audio;
    credit or debit telephone cards; and
    public telephony.      Long-distance
      
    the carrying of switched traffic between two different local
    calling areas that requires the use of a dialing prefix for its
    routing;
    the sale or lease of network capacity for the generation,
    transmission or reception of signs, signals, writings, images,
    voice, sounds or other information of any nature;
    the purchase and lease of network capacity from other carriers
    and domestic and international long-distance telephony.    
    those which require a concession for frequency bands of the
    radio electric spectrum for specific uses;
    those which require a concession to occupy and exploit
    geostationary orbital positions and satellite orbits assigned to
    Mexico;
    those which require a concession to operate radio or television
    broadcasting systems; and
    cable or other restricted television.     41




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##### Table of Contents



Microwave
    Transmissions
  Point-to-point
    
    two consecutive frequency segments in the 15 GHz band, with
    a 56 MHz bandwidth;
    three consecutive frequency segments in the 23 GHz band,
    with a 56 MHz bandwidth; and
    two consecutive frequency segments in the 23 GHz band, with
    a 100 MHz bandwidth.    Point-to-multipoint
     42




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##### Table of Contents



Cable
    Television
      Mobile
    Virtual Network Operation
      Material
    Ongoing Obligations Relating to Our Concessions
  
    Each concession sets forth the ongoing obligations that we must
    meet on a monthly, quarterly or annual basis vis-à-vis the
    SCT and the COFETEL. Our principal ongoing obligations include
    the following:
    File information related to each concessionaires
    shareholders on the first quarter of every year;
    Prepare a monthly report on any failures and interruptions of
    the services;
    Prepare quarterly quality of services reports which shall be
    filed before the SCT if required;
    Prepare commercial practices guidelines which shall be available
    for review by any third party;
    Prepare an emergency response plan which shall be filed before
    the SCT during the following six months after the relevant
    concession granting date;
    Notify the SCT of any relevant event that could affect the
    provision of the services or the performance of the network;
    Register its service fees with the COFETEL each time they are
    modified;
    File within the following 150 days after the last day of
    the preceding fiscal year (i) the corresponding audited
    financial statements, (ii) a description of the principal
    assets of the network, and (iii) a report on the employee
    training and teaching programs that are being implemented;
    Prepare a quarterly report on the status of the expansion and
    coverage of the network;
    Make available the internal statistics on traffic, routing and
    performance of the network; 43




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##### Table of Contents




    Grant a performance bond in favor of the Federal Government to
    guarantee its obligations under the concession;
    File with the SCT within the following 60 days after the
    concession granting date a plan describing the coverage and
    extension of the network; and
    File with the SCT the form of agreement to be entered with the
    concessionaires subscribers.    Interconnection
    Local
    Interconnection
          Mobile
    Interconnection
   44




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##### Table of Contents



Long-distance
    Interconnection
      SCT
    Approvals
  Comisión Federal de Competencia See
  Antitrust
    Approvals
  45-day
    Municipal
    and Other Regulatory Approvals
  See
  C.
    Organizational
    structure  sociedad
    anónima de capital variable
 45




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##### Table of Contents



sociedad anónima de capital variable
     46




---



##### Table of Contents



D.
    Property,
    plant and equipment  and/or
  7-year 5-year
    10-year 5-year
  15-year
 47




---



##### Table of Contents



15-year
  3-year
  ITEM 5.
    OPERATING
    AND FINANCIAL REVIEW AND PROSPECTS  All peso amounts discussed in this annual report are
    presented in constant December 31, 2006 pesos in accordance
    with Mexican GAAP, except as otherwise indicated. You should
    read the following discussion and analysis in conjunction with
    the consolidated financial statements included elsewhere in this
    annual report. The U.S. dollar translations provided in
    this annual report are solely for the convenience of the reader
    and are, unless otherwise indicated, calculated utilizing the
    noon buying rate at December 29, 2006, which was Ps.10.80
    per U.S.$1.00 as reported by the Federal Reserve Bank of New
    York. Sums may not add due to rounding.
    Normas de Información Financiera
  Bulletin B-10, Consejo Mexicano para la Investigación y Desarrollo de
    Normas de Información Financiera, A.C.
  Recent
    Developments
  Private
    Placement of Senior Secured Notes due 2014
   48




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##### Table of Contents



step-up step-up 3 4 3 4
  Capital
    Stock Increase and Acquisition of Grupo
    Telereunión
      Capital Contable
    A.
    Results
    of operations  Devaluation
    and Inflation
   49




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##### Table of Contents



Gross InternationalMexican GDP


Reserves as of theInflation


Average


Annual Growth


End of Each YearYear Ended December 31,

Rate


28-Day Cetes


Rate


(Billion)2002


5.7
%


7.1
%


0.8
%

U.S.$
50.72003


4.0
%


6.2
%


1.4
%

U.S.$
59.02004


5.2
%


6.8
%


4.2
%

U.S.$
64.22005


3.3
%


9.2
%


3.0
%

U.S.$
74.12006


4.1
%


7.2
%


4.8
%

U.S.$
76.3       
    increasing the peso-carrying costs of our
    U.S. dollar-denominated debt and capital expenditure
    requirements;
    decreasing the purchasing power of Mexican consumers, resulting
    in a decrease in demand for telephony services; and
    resulting in our inability, due to competitive pressures, to
    increase our prices in response to such inflation.    Impact of
    Foreign Currency Fluctuations
             50




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##### Table of Contents



Capitalization
    of Pre-operating Expenses
      Customer
    Attrition (Churn)
      Average MonthlyYear Ended December 31,

Churn Rate2002


3.0
%2003


2.6
%2004


2.0
%2005


1.8
%2006


1.6
%     Revenues
      
    installation charges of voice lines;
    monthly fees for the rental of voice lines, which depending on
    the product, include a certain number of free local calls;
    usage charges of voice lines, which can include a combination of
    local calls above those already included in the monthly fees,
    long distance minutes, as well as minutes to mobile numbers
    under the Long Distance Calling Party Pays
    system; and
    charges relating to value-added services such as voice mail,
    call waiting, call forwarding, three-way calling and caller
    identification;
    public telephony services; 51




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##### Table of Contents




    revenues derived from our strategic and commercial alliances
    with CATV operators, which are discounted by the corresponding
    amount we are charged by the CATV operator; and
    the sale of telephone sets.    
    Internet
    dial-up
    access;
    ADSL;
    dedicated Internet access;
    managed services;
    digital private lines; and
    lease of backbone capacity.    Average
    Revenue Per User (ARPU)
      Operating
    Costs and Expenses
    
    network operating costs, which include: (i) technical
    expenses (comprised of electric power, site leases and
    maintenance of telecommunications equipment);
    (ii) installation expenses, when applicable; and
    (iii) disconnection expenses.
    selling, general and administrative expenses, which primarily
    include: (i) salaries, wages and benefits; (ii) fees,
    which are primarily related to consulting, legal and accounting
    services; (iii) leasing costs, which are primarily related
    to our headquarters, warehouses and other facilities;
    (iv) marketing expenses, which are primarily related to the
    implementation of our branding campaign, general advertising and
    promotions; and (v) bad debt (related to past due accounts
    receivable); and
    depreciation and amortization mainly related to pre-operating
    expenses, frequency rights, telephone network systems and
    equipment and intangibles.  Integral
    Cost of Financing
    
    net interest expense and interest income;
    net foreign exchange gains or losses; and
    net gains or losses on monetary position. 52




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##### Table of Contents



Critical
    Accounting Policies
  Applications
    of Critical Accounting Policies and Estimates
      
    it requires us to make assumptions because information was not
    available at the time or it included matters that were highly
    uncertain at the time we were making the estimate; and
    changes in the estimate or different estimates that we could
    have selected would have had a material impact on our financial
    condition or results of operations.  Fair
    Value of Stock Options and Warrants
    Allowance
    of Doubtful Accounts Receivable
     53




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##### Table of Contents



Revenue
    Recognition
    and/or
            Installation
    Revenues and Costs
   54




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##### Table of Contents



Valuation
    of Long-Lived Assets
          Deferred
    Taxes
   55




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##### Table of Contents



Year of Loss

Amount


Year of Maturity(In thousands of pesos)1999

Ps.
15,857



20092000


71,980



20102001


74,481



20112002


246,857



20122003


30,978



20132004


69,621



20142005


101,108



20152006


61,996



2016Total

Ps.
672,878   Results
    of Operations
    Year Ended December 31,2006


2005


2004Net revenues


100
%


100
%


100
%Operating cost and expenses:Network operating costs


38.9
%


33.4
%


35.3
%Selling, general and
    administrative expenses


34.9
%


40.7
%


43.1
%Depreciation and amortization


17.3
%


24.5
%


38.6
%Total operating cost and expenses


91.0
%


98.5
%


117.0
%Operating profit (loss)


9.0
%


1.5
%


(17.0
)%Integral (income)/cost of financing


(6.2
)%


(4.8
)%


5.4
%Special item(1)


(0.1
)%


(1.3
)%


0.0
%Other income (expense), net


(0.1
)%


0.8
%


(0.1
)%Tax provisions


(3.4
)%


(2.3
)%


(3.2
)%Net loss for the year


(1.7
)%


(6.2
)%


(14.9
)%     (1)
    
    In connection with the issuance of the senior secured notes on
    December 20, 2006, the company recognized a special item in
    the amount of Ps.17.0 million, derived from the total
    amortization of the debt issuance costs related to the repayment
    of the
    133/4%
    B series bonds, the 2009 senior
    step-up
    notes and the 2007 senior notes. 56




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##### Table of Contents



Year
    Ended December 31, 2006 Compared to Year Ended
    December 31, 2005
  Net
    revenues
    
    a Ps.335.0 million, or 34.6%, increase in voice revenues
    from Ps.967.9 million in 2005 to Ps.1,302.9 million in
    2006, that we attribute to a 28.7% increase in the average
    number of voice lines in service during the period as we
    continued the buildout of our network infrastructure (this
    increase in voice lines produced a 23.0% increase in monthly fee
    revenues and a 51.2% increase in overall usage fees);
    a Ps.23.0 million, or 43.0%, increase in data revenues from
    Ps.53.5 million in 2005 to Ps.76.5 million in 2006,
    which primarily resulted from increased sales of backbone
    capacity; and
    a Ps.123.5 million, or 70.2%, increase in wholesale
    revenues from Ps.175.7 million in 2005 to
    Ps.299.2 million in 2006, driven by an increase in our long
    distance termination business size unit, primarily as a result
    of the Grupo Telereunión acquisition.    Year Ended December 31,2006


2005


% Change(In millions)Voice

Ps.
1,302.9


Ps.
967.9



34.6
%Data


76.5



53.5



43.0
%Wholesale


299.2



175.7



70.3
%Total revenues

Ps.
1,678.6


Ps.
1,197.1



40.2
%     ARPU2006


2005


% Change(In U.S. dollars)Company:Monthly charges

$
15.5


$
17.1



(9.4
)%Usage


24.9



22.4



11.2
%Subtotal


40.4



39.5



2.0
%Non-recurring


2.4



2.7



(11.1
)%Total company

$
42.8


$
42.2



1.2
%    57




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##### Table of Contents



At December 31,2006


2005


% ChangeVoice lines:Business lines


51,503



36,680



40.4
%Residential lines


190,340



154,233



23.4
%Public Telephony


16,815



5,289



217.9
%Wholesale lines


10,940



10,090



8.4
%Total lines


269,598



206,292



30.7
%   Operating
    Costs and Expenses
    
    a Ps.240.7 million, or 84.3%, increase in network operating
    services resulting mainly from: (i) a Ps.40.7 million increase
    in local-to-mobile interconnection costs associated with a
    significant increase in local-to-mobile traffic; (ii) an Ps.88.8
    million increase in long distance interconnection costs as a
    result of increased long distance traffic; (iii) a Ps.61.9
    million higher operational cost of public telephony services due
    to a 218% increase in lines in service; (iv) a Ps.33.1 million
    increase in costs related to the lease of ports and circuits
    required for our backbone and last mile connectivity as a result
    of our network growth; (v) a Ps.10.5 million increase in costs
    associated with the operation of the CATV network; (vi) a Ps.4.5
    million increase in Internet service costs; and (vii) a Ps.1.2
    million increase in cost of other services;
    a Ps12.2 million, or 12.5%, increase in technical expenses
    primarily due to: (i) a Ps.5.5 million, or 13.2%,
    increase in maintenance costs as a result of our larger
    telephone network; (ii) a Ps.2.9 million, or 9.0%,
    increase in the cost of sites leasing and expenses related to
    the operation of our telephone network; and (iii) a
    Ps.3.8 million, or 15.9%,increase in other expenses;
    a Ps.3.5 million, or 1.2%, decrease in depreciation and
    amortization expenses mainly related to a supplementary
    adjustment in the depreciation of certain fixed assets in
    accordance with
    Bulletin B-10
    of the Mexican Institute of Public Accountants and NIF C-6,
    Property, Machinery and Equipment; and
    a Ps.0.3 million, or 1.8%, increase in installation
    expenses.    Integral
    Cost of Financing
   58




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##### Table of Contents



Year Ended December 31,2006


2005


% Change(In millions)Interest expense  Net

Ps.
(122.7
)

Ps.
(101.1
)


21.4
%Exchange gain (loss) 
    Net


(1.4
)


20.8



(106.7
)%Gain on monetary position


20.7



23.0



(10.0
)%Total integral cost of financing

Ps.
(103.4
)

Ps.
(57.3
)


80.3
%     
    a Ps.21.6 million, or 21.4%, increase in interest paid as a
    result of a higher average outstanding balance of debt during
    2006 compared to 2005;
    a Ps.22.2 million exchange loss on our dollar-denominated
    debt due to the effect of a 1.5% peso depreciation during 2006
    compared to a 4.7% peso appreciation during 2005; and
    a Ps.2.3 million, or 10.0%, decrease in gain on net
    monetary position, as a result of (i) the effect on
    liabilities of a higher inflation rate during 2006 when compared
    to 2005 and (ii) supplementary adjustments in the value of
    fixed assets according to
    Bulletin B-10.  Tax
    Provisions
        Year
    ended December 31, 2005 compared to year ended
    December 31, 2004
  Net
    Revenues
    
    a Ps.198.5 million, or 25.8%, increase in voice revenues
    from Ps.769.4 million in 2004 to Ps.967.9 million in
    2005 that we attribute to a 23.0% increase in the number of
    average voice lines in service during the period, as we
    continued the buildout of our network infrastructure (this
    increase in voice lines produced a 13.3% increase in monthly fee
    revenues and a 27.7% increase in overall usage fees); and
    a Ps.56.5 million, or 47.4%, increase in wholesale
    revenues, from Ps.119.2 million in 2004 to
    Ps.175.7 million in 2005, primarily due to a 20.6% increase
    in traffic from 980.7 millions minutes in 2004 to
    1,183.1 millions minutes in 2005 together with a 22%
    increase in the average cost per minute. 59




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##### Table of Contents



Year Ended December 31,2005


2004


% Change(In millions)Voice

Ps.
967.9


Ps.
769.4



25.8
%Data


53.5



44.9



19.2
%Wholesale


175.7



119.2



47.4
%Total revenues

Ps.
1,197.1


Ps.
933.5



28.2
%     ARPU2005


2004


% Change(In U.S. dollars)Company:Monthly charges

$
17.1


$
18.6



(8.1
)%Usage


22.4



21.6



3.7
%Subtotal


39.5



40.2



(1.7
)%Non-recurring


2.7



2.3



17.4
%Total company

$
42.2


$
42.5



(0.7
)%     At December 31,2005


2004


% ChangeVoice lines:Business lines


36,680



28,249



29.8
%Residential lines


154,233



125,934



22.5
%Public Telephony


5,289



492



975.0
%Wholesale lines


10,090



10,220



(1.3
)%Total lines


206,292



164,895



25.1
%   Operating
    Costs and Expenses
    
    a Ps.55.1 million, or 23.9%, increase in network operating
    services resulting mainly from: (i) a Ps.31.6 million
    increase in local-to-mobile interconnection costs associated
    with a significant increase in local-to-mobile traffic;
    (ii) a Ps.14.3 million increase in long distance
    interconnection as a result of increased long distance traffic;
    (iii) a Ps.6.2 million increase in costs associated
    with the operation of the CATV network; (iv) a
    Ps.4.2 million increase in costs related to the lease of
    ports and circuits required for our backbone and last mile
    connectivity as a result of the growth of our network; and
    (v) a Ps.1.0 million decrease in other costs,
    primarily the reduction of Internet service costs as a result of
    lower rates obtained from new suppliers of Internet access;
    a Ps.10.2 million, or 11.8%, increase in technical expenses
    primarily due to: (i) a Ps.4.5 million, or 12.2%,
    increase in maintenance as a result of our larger telephone
    network; (ii) a Ps.2.3 million, or 7.8%, increase in
    leases of sites and expenses related to the operation of our
    telephone network; and (iii) a Ps.3.4 million increase
    in other expenses;
    a Ps.67.0 million, or 18.6%, decrease in depreciation and
    amortization expenses mainly related to changes in the estimated
    useful life of certain assets and the recalculation of the
    depreciation for the year 2005; and 60




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##### Table of Contents




    a Ps.4.5 million, or 37.3%, increase in installation
    expenses, primarily as a result of lines installed on the CATV
    network. During 2004 and 2005, as a result of competitive
    pressures, we waived installation fees in many instances and we
    expect to continue to do so in the future. We record
    installation expense at the time of installation only when we
    bill our customers for installation fees. Otherwise, we
    capitalize and amortize the installation costs.      Integral
    Cost of Financing
    Year Ended December 31,2005


2004


% Change(In millions)Interest expense  Net

Ps.
(101.1
)

Ps.
(40.3
)


150.9
%Exchange gain (loss) 
    Net


20.8



(1.5
)


1,486.7
%Gain on monetary position


23.0



92.6



(75.2
)%Total Integral cost of financing

Ps.
(57.3
)

Ps.
50.8



(212.8
)%     
    a Ps.60.8 million, or 150.8%, increase in interest paid on
    debt including interest paid on financing obtained from local
    banks and suppliers during 2005;
    a Ps.22.3 million reduction in exchange loss on our
    dollar-denominated debt due to the effect of a 4.9% peso
    appreciation during 2005 compared to 0.3% peso depreciation
    during 2004, as well as lower dollar-denominated indebtedness
    due to our October 2004 debt exchange offer; and
    a Ps.69.6 million, or 75.2%, decrease in gain on net
    monetary position, as a result of the effect of lower inflation
    on our net monetary position in 2005 as compared to the
    inflation during 2004.  Tax
    Provisions
       61




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##### Table of Contents



B.
    Liquidity
    and capital resources      step-up 3 4
    
    indebtedness, not to exceed U.S.$10.0 million at any time
    outstanding, represented by capital lease obligations,
    financings or purchase money obligations, in each case, incurred
    for the purpose of financing all or any part of the purchase
    price or cost of design, construction, installation or
    improvement of property, plant or equipment used in the
    permitted business of the company, in an aggregate principal
    amount, including all permitted refinancing indebtedness
    incurred to renew, refund, refinance, replace, defease or
    discharge any such indebtedness;
    hedging obligations for the purpose of managing our exposure to
    fluctuations in interest rates with respect to indebtedness
    permitted to be incurred by us pursuant to the indenture or
    protecting us against currency fluctuations in the ordinary
    course of business and not for speculative purposes; and
    indebtedness not to exceed U.S.$10.0 million in an
    aggregate principal amount at any time outstanding, including
    all permitted refinancing indebtedness incurred to renew,
    refund, refinance, replace, defease or discharge such
    indebtedness. 62




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##### Table of Contents



Indebtedness
      Year Ended December 31,2006


2005(In thousands)Short Term Commercial Paper
    Denominated in Pesos:Short term commercial paper

Ps.
150,000.0


Ps.
156,080.2Accrued interest


1,500.0



1,560.8Total short term commercial paper
    denominated in pesos


151,500.0



157,641.0Vendor Financing:Vendor financing denominated in
    pesos


23,655.8



83,314.2Vendor financing denominated in
    dollars


54,199.8



181,861.8Total vendor financing


77,855.6



265,176.0Bank Loans Denominated in Pesos:Short-term portion:Ixe Banco, S. A






49,501.7Banco Mercantil del Norte, S. A






19,847.5Banco Santander Serfin, S. A


Total short term






69,349.2Long-term portion:Ixe Banco, S. A






26,039.6Banco Mercantil del Norte, S. A






56,237.8Banco Santander Serfin, S. A


Total long term






82,277.4Total bank loans denominated in
    pesos






151,626.6Short Term Payable Bonds
    Denominated in U.S. Dollars:$11.6 million
    133/4
    B series bonds (issued on March 17, 2000) bearing
    interest at a rate of 13.75% maturing on April 1, 2007


126,047.0



Total Short Term payable bonds
    denominated in U.S. Dollars


126,047.0



Long Term Payable Bonds
    Denominated In U.S. Dollars:$5.1 million 2007 senior
    notes (issued in connection with the 2002 recapitalization) with
    maturity in 2007 bearing interest at 0% until March 2006 and
    thereafter will bear interest at 10%






57,057.0$36.1 million 2009 senior
    step-up
    notes (issued in connection with the 2004 recapitalization)
    bearing a variable interest rate of 4% to 11.25% until October
    2009






402,520.3$11.6 million
    133/4
    B series bonds (issued on March 17, 2000) bearing
    interest at a rate of 13.75% maturing on April 1, 2007






129,166.0$150 million senior secured
    notes (issued on December 20, 2006) bearing interest
    at a rate of 11%, maturing on December 15, 2014


1,631,325.0



Accrued interest


6,813.0



12,593.9Less: Discount (net of accumulated
    amortization)






1,045.4Total Long term payable bonds
    denominated in U.S. dollars


1,638,138.0



600,291.5  63




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##### Table of Contents



Resources
    from Operating, Financing and Investing Activities
  At December 31,2006


2005


% ChangeThousands of constant pesosNet resources provided by
    operating activities


84,714.3



310,675.2



(72.7
)%Net resources used in investing
    activities


(1,004,131.4
)


(465,183.3
)


115.9
%Net resources provided by
    financing activities


1,399,446.4



322,279.1



334.2
%       Resources
    Provided by Operating Activities
    
    Ps.176.8 million decrease in cash resulting from an
    increase in accounts receivable as a result of our incremental
    operations;
    Ps.171.7 million decrease in cash resulting from a decrease
    in short term liabilities;
    Ps.14.6 million decrease in cash resulting from an increase
    in inventory; and
    Ps.28.9 million increase in case resulting from a decrease
    in prepaid expenses.    
    Ps.47.9 million decrease in cash resulting from an increase
    in accounts receivable as a result of the increase in our
    operations;
    Ps.11.6 million decrease in cash resulting from a decrease
    in restricted cash as a result of the repayment of credit
    facilities to Banco Santander Serfin, S.A.;
    Ps.69.3 million increase in cash resulting from an increase
    in short term liabilities;
    Ps.12.7 million decrease in cash resulting from an increase
    in inventory; and
    Ps.0.8 million decrease in cash resulting from an increase
    in prepaid expenses.    
    Ps.19.6 million increase in cash resulting from an increase
    in restricted cash under the Banco Santander financing; 64




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##### Table of Contents




    Ps.99.2 million increase in cash resulting from an increase
    in short term liabilities;
    Ps.7.1 million increase in cash resulting from a decrease
    in inventory as we improved our inventory management;
    Ps.5.9 million increase in cash resulting from a reduction
    in prepaid expenses primarily related to the recognition in 2003
    of the agreement with the landlord at our former headquarters in
    Magdalena to retain a leasehold interest through 2013; and
    Ps.7.7 million decrease in cash resulting from an increase
    in accounts receivable as a result of the growth of our
    operations in 2003.  Resources
    Provided by Financing Activities
    
    Ps.351.1 million provided by the sale of our common stock
    to Grupo VAC Investors for U.S.$31.2 million;
    Ps.1,631.3 million provided by the senior secured notes
    issuance;
    Ps.465.9 million used to pay (i) $5.1 million of
    2007 senior notes and (ii) $36.1 million of 2009senior
    step-up note;
    Ps.151.6 million used to pay (i) Ps.49.5 million
    on the Ixe Banco short term credit facility,
    (ii) Ps.19.8 million on the Banco Mercantil del Norte
    short term credit facility, (iii) Ps.26.0 million on
    the Ixe Banco long term credit facility, and
    (iv) Ps.56.2 million on the Banco Mercantil del Norte
    long term credit facility;
    Ps.226.8 million used for the capitalization of liabilities
    held with a related party in connection with the acquisition and
    sale of a subsidiary; and
    Ps.60.9 million used for other operating activities.    
    Ps.226.8 million provided by the capitalization of
    liabilities held with a related party in connection with the
    acquisition of a subsidiary;
    Ps.157.6 million provided by a short term financing
    denominated in pesos with commercial paper including
    Ps.1.6 million of accrued interest;
    Ps.75.5 million provided by a bank financing denominated in
    pesos obtained from Ixe Banco;
    Ps.76.1 million provided by a bank financing denominated in
    pesos obtained from Banco Mercantil del Norte;
    Ps.19.6 million provided an exchange rate stability hedging
    transaction obtained from Ixe Banco;
    Ps.186.5 million used for the repayment of a bank financing
    denominated in pesos to Banco Santander; and
    Ps.46.9 million used for the inflationary effect on our
    long term payable bonds.    
    a Ps.2,068.2 million decrease in the aggregate principal
    amount of our 2007senior notes;
    a Ps.437.4 million increase in 2009senior
    step-up
    notes; and
    a Ps.620.0 million and Ps.930.1 million increase on
    issuance of capital stock and additional paid-in capital from
    the exchange U.S.$126.4 million aggregate principal amount
    of 2007 senior notes for 96.8 million
    N-1 shares
    and 4.3 million B-1 series shares. This increase in
    resources generated by financing activities in 65




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##### Table of Contents



2004 compares to resources provided of Ps.105.0 million for
    the year ended December 31, 2003, due primarily to the
    inflationary effect (non-cash).  Resources
    Used for Investing Activities
        Capital
    Expenditures
    Dividend
    Policy
    
    a minimum consolidated leverage ratio of less than 4.25 to 1.00
    on or before December 31, 2007, 4.00 to 1.00 on or after
    January 1, 2008 and on or before December 31, 2009 and
    3.50 to 1.00 on or after January 1, 2010;
    no default (as defined in the indenture) must have occurred and
    be continuing or result from the payment of the cash
    dividend; and
    the dividend payments together with the aggregate amount of all
    other restricted payments (as defined in the indenture) do not
    exceed a certain amount determined in the indenture based on,
    among other things: (i) the consolidated net income of the
    company, (ii) the net cash flows from equity offerings,
    (iii) the lesser of the return on the restricted
    investments or the original amount of the restricted investment,
    (iv) the lesser of the fair market value (as defined in the
    indenture) of the companys investment on a subsidiary
    after its redesignation as a restricted subsidiary or the
    original fair value as of the date in which such subsidiary was
    originally designated as unrestricted subsidiary.   66




---



##### Table of Contents



Effect of
    Inflation on Financial Information
  Bulletin B-10,
    Bulletin B-12, Bulletin B-12
  Bulletin B-10,
  
    net interest expense and interest income;
    net foreign exchange gains or losses; and
    net gains or losses on monetary position.      Principal
    Differences between Mexican GAAP and U.S. GAAP
     67




---



##### Table of Contents



Recent
    United States Accounting Pronouncements
       68




---



##### Table of Contents



instrument-by-instrument
    No. 06-03, No. 06-03 No. 06-03 No. 06-03
 69




---



##### Table of Contents



Recent
    Mexican Accounting Pronouncements
            C.
    Research
    and development, patents and licenses, etc.    D.
    Trend
    information    
    The growth in broadband access;
    The convergence of services and industries, as evidenced by the
    introduction of voice, data and video bundles in the market:
    Multi-service IP services;
    Mobile services.      E.
    Off 
    balance sheet arrangements   70




---



##### Table of Contents



F.
    Tabular
    disclosure of contractual obligations  Payment Due by PeriodLess Than








More ThanTotal


1 Year


1-3 Years


3-5 Years


5 Years(In thousands of pesos)Contractual Obligations:Long-Term Debt Obligations


1,908,872.0



277,547.0











1,631,325.0Capital (Finance) Lease Obligations


18,493.6



7,123.2



11,370.4







Vendor Financing


56,107.0



35,616.4



20,490.6







Capital Lease and Vendor Financing
    Accrued Interest at December 31, 2006


10,067.7



8,717.3



1,350.4







Accounts Payable to CFE


38,284.2



1,808.8



2,552.2



2,552.2



31,371.0Debt Obligations Interest






188,326.5



359,040.0



359,040.0



533,573.3Operating Lease Obligation






67,921.9



126,680.8



119,186.8



68,943.9Interest to Account Payable to CFE






5,450.0



7,051.0



6,540.0



38,692.0Total


2,031,824.5



592,511.1



528,535.4



487,319.0



2,303,905.2   ITEM 6.
    DIRECTORS,
    SENIOR MANAGEMENT AND EMPLOYEES  A.
    Directors
    and senior management  Directors
      Name

Age

PositionAdrián Aguirre Gómez


56


Series A Director and Chairman of
    the BoardEduardo Vázquez


44


Series A Director and Vice
    Chairman of the BoardLauro González Moreno


44


Series A DirectorMaría Guadalupe Aguirre
    Gómez


58


Series A DirectorRodrigo Guerra Botello


64


Series A DirectorJacques Gliksberg


49


Series B DirectorMarco Viola


41


Series B DirectorRené Sagastuy Ferrandiz


46


Series B DirectorMarco Provencio Muñoz


48


Series B Director    71




---



##### Table of Contents



Adrián Aguirre Gómez
  María Guadalupe Aguirre Gómez
  Lauro González Moreno
  Marco Provencio Muñoz
  Rodrigo Guerra Botello
  Eduardo Vázquez
 72




---



##### Table of Contents



Jacques Gliksberg
  Marco Viola
  René Sagastuy
    Executive
    Officers
      Name

Age

PositionRené Sagastuy


46


President and Chief Executive
    OfficerJosé Antonio Solbes


41


Chief Financial OfficerRicardo Arévalo Ruiz


44


Chief Operating and Information
    Technology OfficerAlejandro Díaz y Díaz


37


Vice President of Sales and
    Marketing     José Antonio Solbes
 73




---



##### Table of Contents



Ricardo Arévalo Ruiz
  Alejandro Díaz y Díaz
      B.
    Director
    and executive compensation      Ley Federal del
    Trabajo
  Old
    Executive Stock Option Plan
       74




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##### Table of Contents



New
    Executive Stock Option Plan
        C.
    Board
    practices        Committees
    Audit
    Committee
      Ley General de Sociedades
    Mercantiles comisario
 75




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##### Table of Contents



Operating
    Advisory Committee
    D.
    Employees    E.
    Share
    ownership  BASCF-Maxcom
    ITEM 7.
    MAJOR
    SHAREHOLDERS AND RELATED PARTY TRANSACTIONS  A.
    Major
    shareholders and share ownership    ShareholdersBancAguirre


AmericaGómez


Equity


Grupo VAC


OtherShares

Family(1)


Partners(2)


Investors(3)


Investors


SubtotalSeries A SharesNumber of shares


10,890,983







6,398,637







17,289,620Percentage owned


62.99
%






37.01
%






100.00
%Series B SharesNumber of shares






16,460,227







151,368



16,611,595Percentage owned






99.09
%






0.91
%


100.00
%Series N SharesNumber of shares


3,615,565



317,762,353



72,414,866



54,640,779
(4)


448,433,563Percentage owned


0.81
%


70.86
%


16.15
%


12.18
%


100.00
%TotalNumber of shares


14,506,548



334,222,580



78,813,503



54,729,147



482,334,778Percentage owned


3.01
%


69.29
%


16.34
%


11.36
%


100.00
%Percentage of voting shares owned


32.13
%


48.55
%


18.87
%


0.45
%


100.00
%  76




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##### Table of Contents



(1)
    
    Includes shares beneficially owned, directly or indirectly, by
    the Aguirre Gómez family. All of the Aguirre Gómez
    family Series A shares are deposited in a trust for the
    protection of certain investors corporate and liquidity
    rights (including Bank of America). On September 14, 2006,
    Mrs. María Trinidad Aguirre Gómez, sister of
    Mr. Adrián Aguirre Gómez, Chairman of the Board
    of Directors, exchanged with Mr. Eduardo Vázquez the
    ownership of 1,786,757 Series A shares for an equal number
    of Series N shares, and also exchanged with
    Mr. Gabriel Vázquez the ownership of 1,756,756
    Series A shares for an equal number of Series N shares.(2)
    
    The shares beneficially owned by Banc America Equity Partners
    are held through (i) Nexus-Maxcom Holdings I, LLC,
    which holds 231,158,285 shares or approximately 47.92% of
    the total outstanding capital stock, (ii) BASCF-Maxcom
    Holding I, LLC which holds 99,558,557 shares or
    approximately 20.64% of the total outstanding capital stock,
    (iii) BAS Capital Funding Corporation, which holds
    3,155,164 shares or approximately 0.65% of the total
    outstanding capital stock, and (iv) BankAmerica Investment
    Corporation, which holds 350,574 shares or approximately
    0.07% of the total outstanding capital stock.(3)
    
    Includes shares beneficially owned, directly or indirectly, by
    the Grupo VAC Investors. All of the Grupo VAC Investors
    Series A shares are deposited in a trust for the protection
    of certain investors corporate and liquidity rights
    (including Bank of America). On September 14, 2006,
    Mrs. María Trinidad Aguirre Gómez, sister of
    Mr. Adrián Aguirre Gómez, Chairman of the Board
    of Directors, exchanged with Mr. Eduardo Vázquez the
    ownership of 1,786,757 Series A shares for an equal number
    of Series N shares, and also exchanged with
    Mr. Gabriel Vázquez the ownership of 1,756,756
    Series A shares for an equal number of Series N shares.(4)
    
    During 2003 and 2004, Nexus-Maxcom Holdings I, LLC acquired
    approximately 70% of the 2007 senior notes, as well as a similar
    percentage of our old
    Series N-2 shares,
    which are now beneficially owned by
    Nexus-Maxcom
    Holdings I, LLC. Banamex, acting as trustee, is the record
    owner of these shares.
    Series N-2 shares
    were converted into Series N common stock as part of the
    transaction with the Grupo VAC Investors. In October 2004,
    Nexus-Maxcom Holdings I, LLC exchanged all of its 2007
    senior notes for equity securities.  Shareholders
    Agreement
        
    requires that certain key matters must be approved by the
    affirmative vote of a combination of Nexus
    and/or the
    Grupo VAC Investors (acting through a representative), as well
    as our board of directors,
    provides restrictions on transfers of our capital stock, and
    provides rights of first offer, participation rights (tag-along)
    and forced sale (drag-along), and rights and obligations with
    respect to public offerings and transfers of our capital stock.   77




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##### Table of Contents



B.
    Related
    party transactions  General
    policy
    Advertising
  series A-1 shares
  Spin-off
    and sale of subsidiary
      C.
    Interest
    of experts and counsel    ITEM 8.
    FINANCIAL
    INFORMATION  A.
    Consolidated
    statements and other financial information  Financial
    Statements
    Legal
    Proceedings
    Dividend
    Policy
    B.
    Significant
    changes   78




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ITEM 9.
    THE
    OFFER AND LISTING    ITEM 10.
    ADDITIONAL
    INFORMATION  A.
    Share
    capital    B.
    Memorandum
    and articles of association  General
          Percentage ofNumber of


Total CapitalClass of Shares

Shares


StructureSeries A


17,289,620



3.59
%Series B


16,611,595



3.44
%Series N


448,433,563



92.97
%Total


482,334,778



100
%   Dirección General de Inversión
    Extranjera
  Voting
    Rights
    vice-chairman
 79




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##### Table of Contents




    such shareholders have not voted in favor of a resolution
    approved at the relevant shareholders meeting pursuant to
    which it was resolved not to take any action against the
    directors who are to be sued; and
    the claim in question covers the total amount of damages alleged
    to have been caused to Maxcom as well as to the individual
    plaintiffs interests.     80




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##### Table of Contents



Approval
    of Key Matters
  and/or
    
    any assignment by the company or any of its subsidiaries for the
    benefit of creditors or the voluntary commencement of any
    bankruptcy or insolvency proceedings;
    subject to certain exceptions, the entering into any transaction
    with any of Maxcoms officers, directors, employees,
    bondholders, shareholders, or any of their respective affiliates
    or individuals related by blood or marriage;
    the election, appointment or removal of the chief executive
    officer, the general managers of any business units, the chief
    operating officer, the chief financial officer, the director of
    marketing and the chief engineer (or any other individual with a
    similar or more senior title or position), and the approval of
    salary, compensation and benefit or other similar plans for such
    key executives;
    the approval of the companys and its subsidiaries
    annual business plan and annual budget for each fiscal year and
    transactions not contemplated by such plans;
    any agreement that would restrict the companys or any of
    its subsidiaries right or ability to perform the
    provisions of its by-laws (Estatutos) or any agreements or
    instruments to which it and its shareholders are parties or
    conduct its business as currently conducted or proposed to be
    conducted at anytime;
    the incurrence or assumption by the company
    and/or any
    of its subsidiaries of any indebtedness (including capitalized
    lease obligations) or other liabilities exceeding
    U.S.$10 million at any time;
    subject to certain exceptions, the transfer or other disposal of
    all or a significant portion of the assets or equity securities
    of Maxcom or any of its subsidiaries (including, but not limited
    to, any shares held by Maxcom as treasury shares) by Maxcom or
    any of its subsidiaries in any form of transaction, or the
    merger, consolidation, spin off, recapitalization,
    reorganization (including a change in the legal nature of Maxcom
    or any of its subsidiaries), dissolution or liquidation of
    Maxcom or any of its subsidiaries;
    the establishment by the company or any of its subsidiaries of
    any non-wholly-owned-subsidiary or the making by the company or
    any of its subsidiaries of any loans or advances to, guarantees
    for the benefit of, or investments in, any person or entity
    other than a wholly-owned subsidiary, other than advance payment
    to suppliers not exceeding U.S.$2 million at any one time;
    the redemption of shares by Maxcom, other than a pro-rata
    redemption of shares (without regard to class or series of
    shares) held by all of the shareholders; and
    any commitment or agreement to do any of the foregoing.    
    the issuance of any equity securities of Maxcom or any of its
    subsidiaries at a price below U.S.$0.3957 (adjusted for stock
    splits, stock dividends, recapitalizations and similar events)
    other than shares currently 81




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reserved for future issuance pursuant to stock option and
    existing management incentive plans as of the date of the
    approval of the by-laws by the shareholders; and  
    any amendments to the concessions/licenses granted by the
    Mexican authorities, certain provisions of our by-laws that
    pertain specifically to the Grupo VAC Investors and certain
    other specified agreements with the Grupo VAC Investors.    
    the issuance of any equity securities of Maxcom or any of its
    subsidiaries other than shares currently reserved for future
    issuance pursuant to stock option and existing management
    incentive plans as of the date of the approval of the by-laws by
    the shareholders;
    the declaration, setting aside or payment of any dividends on,
    or making any other distributions in respect of, any of capital
    stock, other than dividends and distributions by a direct or
    indirect wholly owned subsidiary of Maxcom to its parent;
    the purchase, redemption or other acquisition of any equity
    securities of Maxcom or any of its subsidiaries or reduction in
    capital of any Maxcom shares or any securities of its
    subsidiaries;
    the entering by Maxcom or any of its subsidiaries into any new
    line of business (other than the main corporate purpose of the
    company);
    the manner in which the shares or other interests of any
    subsidiary or entity owned by Maxcom shall be voted at
    shareholders meetings called for key matters;
    any amendments to the concessions/licenses granted by the
    Mexican authorities, by-laws and certain other specified
    agreements;
    the subdivision or combination, in any manner, of the
    outstanding shares of one class or series of shares, unless the
    outstanding shares of the other class or series of shares of the
    company shall also be proportionately subdivided or combined in
    a similar manner;
    subject to certain exceptions, the grant to any person or entity
    of the right to request the company to register
    securities; and
    any commitment or agreement to do any of the foregoing.  Investor
    Rights
      
    July 20, 2011, or
    the agreement of the board of directors and Nexus to so
    terminate such restrictions.  Board of
    Directors
   82




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Dividends
      Liquidation
    Rights
    Changes
    in Share Capital
        Preemptive
    Rights
        
    mergers or spin-offs;
    the conversion of convertible debentures; or 83




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
    issuances of shares pursuant to a public offering, if a general
    extraordinary shareholders meeting called for such purpose
    so approves and other requirements specified in Article 81
    of the Mexican Securities Law are satisfied, including obtaining
    the approval of the Mexican National Banking and Securities
    Commission.    Mandatory
    Conversion
  and/or
  Restrictions
    on Transfer of Shares
    and/or
    
    the sale or transfer of at least 50.1% of the total capital
    stock of Maxcom or the sale of all or substantially all of the
    consolidated assets of Maxcom in one or more related
    transactions to an independent third party or parties;
    a qualified public offering in which all of the shares owned
    beneficially by the BA Investors are registered and sold;
    subject to the prior written consent of Nexus, the requirement
    of the managing underwriter in connection with a qualified
    public offering; or
    the agreement of the board of directors and Nexus to terminate
    such restrictions.  Right of
    First Refusal
    
    the sale or transfer of at least 50.1% of the total capital
    stock of Maxcom or the sale of all or substantially all of the
    consolidated assets of Maxcom in one or more related
    transactions to an independent third party or parties;
    the elimination of certain foreign ownership restrictions under
    Mexican law so as to permit the unrestricted ownership
    and/or
    control of Maxcom by non-Mexicans; or
    the agreement of the board of directors and Nexus to terminate
    such restrictions. 84




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##### Table of Contents



Right of
    First Offer
  Right
    of First Offer by Investors (Other Than BA
    Investors)
    Right
    of First Offer by Grupo VAC
  and/or and/or
  Termination
    of Right of First Offer
    
    the sale or transfer of at least 50.1% of the total capital
    stock of Maxcom or the sale of all or substantially all of the
    consolidated assets of Maxcom in one or more related
    transactions to an independent third party or parties;
    a qualified public offering in which all shares owned
    beneficially by the BA Investors are registered and sold and,
    with respect to the right of first offer on transfers by
    investors other than the BA Investors, the Grupo VAC Investors
    also agree to such termination;
    subject to the prior consent of Nexus, the written requirement
    of the managing underwriter in connection with a qualified
    public offering; or
    the agreement of the board of directors, Nexus and the Grupo VAC
    Representative to terminate such requirements.  Co-sale Rights and Forced Sale Obligations
  Co-sale
    rights
    
    the sale or transfer of at least 50.1% of the total capital
    stock of Maxcom or the sale of all or substantially all of the
    consolidated assets of Maxcom in one or more related
    transactions to an independent third party or parties; 85




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
    a qualified public offering in which all shares owned
    beneficially by the BA Investors are registered and sold and,
    with respect to the right of first offer on transfers by
    investors other than the BA Investors, the Grupo VAC
    Investors also agree to such termination;
    subject to the prior consent of Nexus, the written requirement
    of the managing underwriter in connection with a qualified
    public offering; or
    the agreement of the board of directors, Nexus and the Grupo VAC
    Representative to terminate such requirements.  Forced
    sale obligations
  and/or and/or and/or
  and/or and/or
    
    the sale or transfer of at least 50.1% of the total capital
    stock of Maxcom or the sale of all or substantially all of the
    consolidated assets of Maxcom in one or more related
    transactions to an independent third party or parties;
    a qualified public offering in which all shares owned
    beneficially by the BA Investors are registered and sold;
    subject to the prior consent of Nexus, the written requirement
    of the managing underwriter in connection with a qualified
    public offering; or
    the agreement of the board of directors, Nexus and the Grupo VAC
    Representative to terminate such requirements.  Other
    provisions
     86




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Rights
    and Obligations with Respect to Public Offerings
  Registration
    rights
      Lock-up
    restrictions
  lock-up
  Other
    Provisions
  Ownership
    Restrictions
    Forfeiture
    of Stock
   87




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Dissolution
    
    the impossibility of continuing with our current line of
    business;
    the resolution of our shareholders at an extraordinary general
    shareholders meeting;
    the reduction of the number of our shareholders to fewer than
    two; and
    the loss of two-thirds of our capital stock.  Shareholder
    Conflicts of Interest
    Director
    Conflicts of Interest
    Description
    of the CPO Trust
  General
         88




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Purpose
    Waiver
    of Statutory Preemptive Rights
    Voting
    and Economic Rights
      Administration
    of the CPO Trust
    Common
    Representative
   89




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##### Table of Contents



Transfer
    Term
    and Termination
    Fees
    C.
    Material
    contracts  Shareholders
    Agreement
    Grupo VAC
    Investors Agreements
        Spin-off
    and Sale of Subsidiary Mijolife, S.A. de C.V.
    Credit
    Facilities
  Ixe
    Banco
   90




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Certificados
    Bursátiles
    Banorte
        Collection
    Trust
    Hedging
    Agreement
      Senior
    Secured Notes due 2014
   91




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##### Table of Contents



Alcatel
    IPTV Supply Agreement
  ®
  Currency
    Swap Agreement
    D.
    Exchange
    controls      E.
    Taxation  Certain
    Material United States Federal Income Tax
    Considerations
  IRS Circular 230
    Disclosure: To ensure compliance with
    requirements imposed by the U.S. Internal Revenue Service,
    we inform you that any tax advice contained in this document
    (including any attachments) was not intended or written to be
    used, and cannot be used, by any taxpayer for the purpose of
    avoiding tax-related penalties under the U.S. Internal
    Revenue Code. The tax advice contained in this document
    (including any attachments) was written to support the promotion
    or marketing of the transaction(s) or matter(s) addressed by the
    document. Each taxpayer should seek advice based on the
    taxpayers particular circumstances from an independent tax
    advisor.
   92




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
    a citizen or individual resident of the United States,
    a corporation (or entity or arrangement treated as a corporation
    for U.S. federal income tax purposes) created or organized,
    or treated as created or organized, in or under the laws of the
    U.S. or any political subdivision of the U.S.,
    an estate the income of which is subject to U.S. federal
    income taxation regardless of its source or
    a trust (i) if a court within the U.S. is able to
    exercise primary supervision over the trusts
    administration and one or more U.S. persons have authority
    to control all substantial decisions of the trust or
    (ii) that has a valid election in effect under applicable
    Treasury Regulations to be treated as a U.S. person.  Non-U.S. Holder
    EACH HOLDER IS URGED TO CONSULT ITS TAX ADVISOR REGARDING THE
    SPECIFIC FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX
    CONSIDERATIONS OF HOLDING SENIOR SECURED NOTES, SHARES OR
    CPOS.
  U.S
    Holders of Senior Secured Notes
  U.S.
    Tax Characterization of the Senior Secured Notes
   93




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Payments
    of Interest and Additional Amounts
      Sale
    or Other Taxable Disposition of the Senior Secured
    Notes
  U.S.-source
    Acquisition
    Premium
   94




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Market
    Discount
      instrument-by-instrument
  Mexican
    Withholding Tax
     95




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U.S
    Holders of Shares or CPOs
  Distributions
        Sale
    or Other Taxable Disposition of the Shares or CPOs
       96




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Passive
    Foreign Investment Company Considerations
          Controlled
    Foreign Corporation Considerations
   97




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##### Table of Contents



Non-U.S
    Holders of Senior Secured Notes, Shares or CPOs
  Non-U.S. Holder Non-U.S. Holder Non-U.S. Holder Non-U.S. Holder
  Withholding
    and Information Reporting for U.S. Holders and
    Non-U.S.
    Holders of Senior Secured Notes, Shares or CPOs
  Form W-9
  Non-U.S. Holder
    THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE
    IS INCLUDED FOR GENERAL INFORMATION PURPOSES ONLY. HOLDERS ARE
    URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
    FEDERAL, STATE AND LOCAL AND
    NON-U.S. TAX
    CONSIDERATIONS OF OWNING OUR SENIOR SECURED NOTES, SHARES OR
    CPOS.
  Mexican
    Income Tax Considerations
  Ley del Impuesto Sobre la
    Renta
   98




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Mexican
    Tax Residence
    United
    States of America/Mexico and Other Tax Treaties
    Mexican
    Tax Consequences to Foreign Holders of the Senior Secured
    Notes
  Taxation
    of Interest and Principal
    
    the senior secured notes are place through banks or brokerage
    houses in a country with which Mexico has entered into a tax
    treaty for the avoidance of double taxation that is in force;
    we have delivered notice of the offering of the senior secured
    notes to the Mexican National Banking and Securities Commission
    (Comisión Nacional Bancaria y de Valores) pursuant
    to Article 7 of the Mexican Securities Market Law (Ley
    del Mercado de Valores); and
    certain periodic information requirements specified by the
    Mexican Ministry of Finance (Secretaría de Hacienda y
    Crédito Público) are complied with.    Secretaría de Hacienda y
    Crédito Público
 99




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
    our shareholders who own, directly or indirectly, individually
    or jointly with related parties, more than 10% of our voting
    stock; or
    legal entities 20% or more of whose stock is owned, directly or
    indirectly, individually or jointly with related parties, by the
    us or by persons related to us.  Secretaría de
    Hacienda y Crédito Público
          Capital
    Gains
    Other
    Taxes
    F.
    Dividends
    and paying agents    G.
    Statement
    by experts   100




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##### Table of Contents



H.
    Documents
    on display  1-800-SEC-0330
  I.
    Subsidiary
    information   PART II  ITEM 11.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK    Interest
    Rate Risk
  3 4
  Foreign
    Exchange Risk
  3 4 3-year
      ITEM 12.
    DESCRIPTION
    OF SECURITIES OTHER THAN EQUITY SECURITIES   101




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PART III  ITEM 13.
    DEFAULTS,
    DIVIDEND ARREARAGES AND DELINQUENCIES    ITEM 14.
    MATERIAL
    MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
    PROCEEDS    ITEM 15.
    CONTROLS
    AND PROCEDURES  Form 20-F Rules 13a-14(c) 15d-14(c)
    ITEM 16A.
    AUDIT
    COMMITTEE FINANCIAL EXPERT    ITEM 16B.
    CODE
    OF ETHICS    011-52-55-5147-1125.
 102




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##### Table of Contents



ITEM 16C.
    PRINCIPAL
    ACCOUNTANT FEES AND SERVICES    Year Ended December 31,2006


2005(In millions)Audit Fees(1)

Ps.
6.2


Ps.
2.7Audit-Related Fees

Ps.
0.9


Ps.
0.8Taxes Fees(2)

Ps.
0.7


Ps.
0.4Other Fees

Ps.
0.5


Ps.
0.5     (1)
    
    Audit Fees includes fees associated with the annual audit of our
    consolidated financial statements. Audit fees also include fees
    associated with Securities and Exchange Commission statutory and
    annual reporting audit requirements.(2)
    
    Taxes Fees includes fees associated with preparation of tax
    filings and fees for assistance with tax planning and tax
    compliance matters.   103




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##### Table of Contents



ITEM 16D.
    EXEMPTIONS
    FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.    ITEM 16E.
    PURCHASE
    OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED
    PURCHASERS.  § 240.10b-18(a)(3),
 PART IV  ITEM 17.
    FINANCIAL
    STATEMENTS   104




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ITEM 18.
    FINANCIAL
    STATEMENTS.  PageMaxcom Telecomunicaciones, S.A.
    de C.V. and SubsidiariesIndependent
    Auditors Report


F-1Consolidated Financial Statements:Consolidated
    Balance Sheets


F-2Consolidated Income
    Statements


F-3Consolidated
    Statements of Changes in Stockholders Equity


F-4Consolidated
    Statements of Changes in Financial Position


F-5Notes to the
    Consolidated Financial Statements


F-6  105




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##### Table of Contents



REPORT
    OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                   F-1




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND
    SUBSIDIARIES
 CONSOLIDATED
    BALANCE SHEETS AS OF DECEMBER 31, 2006 AND 2005(Notes 1
    to 5)Thousands of Mexican Pesos (Ps.) in purchasing
    power
    as of December 31, 2006 2006


2005ASSETSCurrent assets:Cash and cash equivalents

Ps.
712,508


Ps.
232,479Restricted cash (Note 12)


22,612



735,120



232,479Accounts receivable:Customers, net of allowance for
    doubtful accounts of Ps.89,373 and Ps.89,732 for 2006 and 2005,
    respectively


321,850



179,116Value added tax recoverable


106,808



23,676Other accounts receivable


39,019



22,388467,677



225,180Inventory


34,493



16,027Prepaid expenses  Net


63,358



79,898Total current assets


1,300,648



553,584Restricted long-term cash
    (Note 12)






7,983Telephone network systems and
    equipment  Net (Note 6)


3,042,816



2,167,218Intangible assets  Net
    (Note 7)


322,371



315,829Preoperating expenses 
    Net


94,777



127,262Frequency rights  Net
    (Note 8)


85,172



89,592Other assets:Labor obligations upon retirement
    (Note 15)


14,522



15,398Other assets


22,069



10,924Total assets

Ps.
4,882,375


Ps
3,287,790LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilities:Accrued expenses and accounts
    payable

Ps.
508,487


Ps.
142,627Commercial paper (Note 10)


151,500



157,641Payable bonds (Note 11)


126,047



Bank loans  short term
    portion (Note 12)






69,349Notes payable short term


37,521



119,029Accrued Interest


6,813



12,594Clients deposits


2,635



4,161Other taxes


26,377



19,465Derivative financial instruments
    (Notes 5r. and 14)


14,651



Total current liabilities


874,031



524,866Long-term liabilities:Payable bonds (Note 11)


1,631,325



587,698Notes payable


40,335



146,147Bank loans (Note 12)






82,277Other accounts payables


35,807



26,072Deferred taxes (Note 19)


85,483



27,608Labor obligations upon retirement
    (Note 15)


20,968



17,370Derivative financial instruments
    (Notes 5r. and 14)






19,601Total long-term liabilities


1,813,918



906,773Total liabilities


2,687,949



1,431,639Shareholders equity
    (Notes 16 y 17):Capital stock


3,206,932



2,855,853Additional paid-in capital


243,927



228,524Deficit


(1,256,433
)


(1,228,226
)Total shareholders equity


2,194,426



1,856,151Commitments and contingencies
    (Note 20)Subsequent events (Note 21)Total liabilities and
    shareholders equity

Ps.
4,882,375


Ps.
3,287,790    F-2




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MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND
    SUBSIDIARIES
 CONSOLIDATED
    INCOME STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
    Thousands of Mexican Pesos (Ps.) in purchasing power
    
    as of December 31, 2006 2006


2005


2004Net revenues (Note 18)

Ps.
1,678,593


Ps.
1,197,104


Ps.
933,513Operating costs and expenses:Network operating costs


(652,452
)


(399,320
)


(329,439
)Selling, general and
    administrative expenses


(585,496
)


(487,250
)


(402,551
)Depreciation


(186,338
)


(148,134
)


(231,333
)Amortization


(103,244
)


(144,917
)


(128,738
)Total operating costs and expenses


(1,527,530
)


(1,179,621
)


(1,092,061
)Operating income (loss)


151,063



17,483



(158,548
)Integral cost of financing:Interest expense and
    commissions  Net


(138,814
)


(105,389
)


(40,303
)Interest income


8,280



4,331



Exchange gain (loss) 
    net


6,511



20,783



(1,510
)Gain from monetary position


20,724



22,985



92,649(103,299
)


(57,290
)


50,836Other income  Net


(1,065
)


9,354



(852
)Income (loss) before special item


46,699



(30,453
)


(108,564
)Special item (Notes 3b. and 7)


(17,031
)


(15,988
)


Income (loss) before provision for
    taxes


29,668



(46,441
)


(108,564
)Tax provision (Note 19):Assets tax






(661
)


(28,963
)Deferred income tax


(57,875
)


(27,024
)


(1,181
)(57,875
)


(27,685
)


(30,144
)Net loss for the year

Ps.
(28,207
)

Ps.
(74,126
)

Ps.
(138,708
)    F-3




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MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND
    SUBSIDIARIES
 CONSOLIDATED
    STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
    Thousands of Mexican Pesos (Ps.) in purchasing power
    
    as of December 31, 2006 Additional





TotalCapital


Paid-in





ShareholdersStock


Capital


Deficit


EquityBalances at December 31, 2003

Ps.
1,982,246


Ps.
1,689


Ps.
(1,691,891
)

Ps.
292,044Increase in capital stock arising
    from debt restructuring


620,081



930,102







1,550,183Comprehensive loss for the year










(138,708
)


(138,708
)Balances at December 31, 2004


2,602,327



931,791



(1,830,599
)


1,703,519Spin-off effect (Note 3b.)


(676,605
)






676,499



(106
)Capitalization of premium on
    shares subscription (Note 16)


930,131



(930,131
)






Capitalization of liabilities
    (Notes 3b. and 16)






226,864







226,864Comprehensive loss for the year










(74,126
)


(74,126
)Balances at December 31, 2005


2,855,853



228,524



(1,228,226
)


1,856,151Increase in capital stock
    (Note 16)


351,079











351,079Stock option plan (Note 17)






15,403







15,403Comprehensive loss for the year










(28,207
)


(28,207
)Balances at December 31, 2006

Ps.
3,206,932


Ps.
243,927


Ps.
(1,256,433
)

Ps.
2,194,426    F-4




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND
    SUBSIDIARIES
 STATEMENTS
    OF CHANGES IN CONSOLIDATED FINANCIAL POSITIONFOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
    Thousands of Mexican Pesos (Ps.) in purchasing power
    
    as of December 31, 2006 2006


2005


2004Operating activities:Net income (loss)

Ps.
(28,207
)

Ps.
(74,126
)

Ps.
(138,708
)Charges to income not affecting
    resources:Depreciation


186,338



148,134



231,333Amortization


103,244



144,917



127,738Deferred income tax


57,875



27,024



1,181Compensation expense on stock
    option plan


15,403







Special item


17,031







Labor obligations upon retirement


4,474



1,972



(Increase) decrease in:Accounts receivables 
    Net


(241,927
)


(65,017
)


(17,166
)Inventory  Net


(18,466
)


(3,865
)


8,707Prepaid expenses  Net


17,747



(11,228
)


(10,436
)Restricted cash and other current
    assets and liabilities  Net


(28,798
)


142,864



84,281Resources provided by operating
    activities


84,714



310,675



287,930Financing activities:Capital stock increase


351,079







620,081Contributions for future capital
    increases










930,102Spin off effect






(106
)


Capitalization of liabilities






226,864



Derivative financial instruments


(5,028
)


19,601



Benefits of loans and bonds
    payable net of payments and capitalizations


1,053,395



75,920



(1,446,732
)Resources provided by financing
    activities


1,399,446



322,279



103,451Investing activities:Telephone network system and
    equipment  Net


(825,804
)


(458,946
)


(349,447
)Acquisition of subsidiaries


(97,508
)






Intangible assets  Net


(79,845
)


(17,799
)


(33,839
)Other assets


(974
)


11,562



9,360Resources used in investing
    activities


(1,004,131
)


(465,183
)


(373,926
)Cash and cash equivalents:Increase of cash and cash
    equivalents


480,029



167,771



17,455Cash and cash equivalents at the
    beginning of the period


232,479



64,708



47,253Cash and cash equivalents at the
    end of the period

Ps.
712,508


Ps.
232,479


Ps.
64,708    F-5




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND
    2004
 (Figures in thousands of Mexican Pesos (Ps.) of
    purchasing power as
 of December 31, 2006, and in thousands of
    U.S. Dollars ($),
 except for exchange rates, stock values, options and
    warrants)
  NOTE 1 
    INCORPORATION
    AND
    BUSINESS:    NOTE 2 
    CONCESSIONS,
    FREQUENCY RIGTHS AND INTERCONNECTION
    AGREEMENTS:  Concessions
    Frequency rights
  point-to-point point-to-multi-point point-to-point point-to-multipoint
    Convergence agreement
  and/or
  and/or
 F-6




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
   Interconnection agreements
          NOTE 3 
    MAIN
    CORPORATE
    EVENTS:  Acquisition of Grupo Telereunión
        Net AssetsBook Value of


Negative


Recognized atNet Assets at


Goodwill


Fair value atJune 30, 2006


Allocation


June 30, 2006Assets:Fixed assets

Ps.
406,299


Ps.
(254,677
)

Ps.
151,622Intangible assets


216,698



(122,917
)


93,781Current assets


54,482







54,482Deferred taxes


36,110



(36,110
)


713,589



(413,704
)


299,885Liabilities:Current liabilities


(203,624
)






(203,624
)Net acquired assets


509,965



(413,704
)


96,261Fair value of net assets


(96,261
)






(96,261
)Value in excess over investment on
    subsidiaries (negative goodwill)

Ps.
413,704


Ps.
(413,704
)

Ps.
  F-7




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
          Net revenues

Ps.
85,211Network operating costs


(59,005
)SG&A


(1,213
)Depreciation


(10,041
)Operating income

Ps.
14,952Net income

Ps.
25,786       December 31,2006


2005(Unaudited)Net revenues

Ps.
1,744,759


Ps.
1,338,272Network operating costs


(696,961
)


(490,000
)SG&A


(601,246
)


(519,958
)Depreciation


(309,952
)


(343,729
)Operating income (loss)


136,600



(15,415
)Net loss for the year

Ps.
(502,326
)

Ps.
(151,766
)   Spin off and sale of subsidiary
   F-8




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
      ConsolidatedBalances


Consolidated Balance Sheetsof Maxcom


After Spin OffBefore Spin-Off


Mijolife


MaxcomASSETSCurrent assets

Ps.
164,992






Ps.
164,992Accounts receivables andother accounts receivable


212,977


Ps.
8,733



204,244Fixed assets and other long term
    assets


2,572,207







2,572,207Total assets

Ps.
2,950,176


Ps.
8,733


Ps.
2,941,443LIABILITIES AND SHAREHOLDERS
    EQUITYTotal liabilities

Ps.
1,457,404


Ps.
8,627


Ps.
1,448,777Shareholders equity


1,492,772



106



1,492,666Total liabilities and
    shareholders equity

Ps.
2,950,176


Ps.
8,733


Ps.
2,941,443       NOTE 4 
    BASIS
    OF
    PRESENTATION:  Consolidation
    Subsidiary Company

Interest %

Line of BusinessCorporativo en Telecomunicaciones,
    S. A. de C. V.


100%


Technical personnel servicesMaxcom Servicios Administrativos,
    S. A. de C. V.


100%


Administrative personnel servicesMaxcom SF, S. A. de C. V.


100%


Rendering of financial servicesOutsourcing Operadora de Personal,
    S. A. de C. V.


100%


Operating personnel servicesTécnicos Especializados en
    Telecomunicaciones, S. A. de C. V.


100%


Operating personal servicesMaxcom TV, S. A. de C. V.


100%


Cable television servicesMaxcom USA, Inc.


100%


International telecommunication
    service providerTelereunión, S. A. de C.
    V.


100%


Long distance service provider and
    infrastructure lessorTelscape de México, S. A. de
    C. V.


100%


Infrastructure lessor and computer
    services providerSierra USA Communications,
    Inc.


100%


International telecommunication
    service provider  F-9




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
        NOTE 5 
    SUMMARY
    OF SIGNIFICANT ACCOUNTING
    POLICIES:            Recognition of the effects of the inflation
       F-10




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
         Cash and temporary investments
    Inventories
    Telephone network systems and equipment
               F-11




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
   Intangibles
        Bulletin C-9
  Concessions
  30-year
  Bulletin C-8
  Frequency rights
    Preoperating expenses
      Long-lived assets
  non-amortizable
 F-12




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Liabilities and provisions
    Transactions in foreign currencies
    Income tax and employees statutory profit
    sharing
  asset-and-liability
  Labor obligations upon retirement
      Financial instruments
  and/or
  Revenue recognition
      and/or
       F-13




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
              Stock-options compensation
      Bulletin A-8
  inter alia
   F-14




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
     2006


2005


2004Expected yield










Expected stock price volatility


30.00
%


55.00
%


52.03.
%Risk-free interest rate


5.00
%


4.35
%


2.76
%Expected life of options


3.5



10



3   Information by segments
  Bulletin B-5
  Derivative financial instruments
  Bulletin C-10,
  Bulletin C-10, and/or
  Infrastructure rights
    New accounting standards
       F-15




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
       NOTE 6 
    TELEPHONE
    NETWORK SYSTEMS AND EQUIPMENT 
    NET:    Estimated Useful2006


2005


Live YearsTelecommunication network and
    equipment

Ps.
2,657,077


Ps.
1,740,089



17Leasehold improvements


525,401



470,391



12Radio equipment


295,949



280,711



30Line installation cost


359,065



277,783



20Electronic equipment


255,183



232,355



25Capitalized expenses due to
    construction of networks


285,315



218,215



30Computer equipment


105,392



82,101



5Transportation equipment


35,203



31,194



4Office furniture


21,397



18,696



10Other


19,019



18,199



10Engineering equipment


12,431



12,427



10Subtotal


4,286,117



3,163,946Accumulated depreciation and
    amortization


(1,679,397
)


(1,293,432
)Subtotal


2,606,720



1,870,514Constructions in progress


436,096



296,704Ps.
3,042,816


Ps.
2,167,218          F-16




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    2006


2005Computer equipment

Ps.
2,195


Ps.
16,599Transportation equipment


8,472



11,392Telecommunications equipment


41,690



9,312Total

Ps.
52,357


Ps.
37,303   NOTE 7 
    INTANGIBLE
    ASSETS:    UsefulLive Years2006


2005


2006Infrastructure rights

Ps.
335,494


Ps.
312,653



30 y 15Debt issuance costs


40,870



254,059



8Software licenses


172,199



156,065



3.3548,563



722,777Accumulated amortization


(226,192
)


(406,948
)Ps.
322,371


Ps.
315,829       NOTE 8 
    FREQUENCY
    RIGHTS:    2006


2005Frequency rights

Ps.
150,364


Ps.
150,364Less  Accumulated
    Amortization


(65,192
)


(60,772
)Ps.
85,172


Ps.
89,592    F-17




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  NOTE 9 
    RELATED
    PARTIES:    2006


2005


2004Commission and administrative
    services paid to:Comercializadora Road el Camino,
    S. A, de C. V.(1)

Ps.
311


Ps.
1,485


Ps.
41Road Telco & Consulting,
    S. A, de C. V.(2)


1,580







Expenses related to Bank of
    America, Co.(3)


383



508



431Advertising services provided by
    Difusión Panorámica, S. A. de C. V.(4)


21



35



95Leasing of office space(5)










284Commissions paid to Francisco
    Adrián Aguirre Palme(6)










62Travel expenses related to Bachow
    and Associates, Inc.(7)










33Ps.
2,295


Ps.
2,028


Ps.
946Revenues for telephony services
    collected from related parties

Ps.
906


Ps.
896


Ps.
1,069     (1)
    
    Adrián Aguirre (Maxcom shareholder) is a shareholder of the
    entity. The activity of 2005 and 2004 2006 correspond to
    sales commissions and telephone lines.(2)
    
    Adrián Aguirre (Maxcom shareholder) is a shareholder of
    Road Telco & Consulting. The transactions carried out
    during 2006 correspond to administrative services.(3)
    
    Correspond to expenses relating to the debt restructuring and
    travel expenses held with Bank of America (Maxcom shareholder).(4)
    
    Bank of América is a shareholder of Difusión
    Panorámica. Balances represent advertising services
    provided.(5)
    
    The Company leased a site located within the premises of a
    building that, until 2004, was controlled by the family of
    Adrián Aguirre (Maxcom shareholder).(6)
    
    During 2004, the Company incurred expenses of sales
    commissions of telephone lines.(7)
    
    Travel expenses related to certain shareholders.    NOTE 10 
    COMMERCIAL
    PAPER:   F-18




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  NOTE 11 
    PAYABLE
    BONDS:    2006


2005$11,590: Series B
    Bonds (issued on March 17, 2000) bearing
    interest at a rate of 13.75%, with maturity date on
    April 1st,
    2007

Ps.
126,047


Ps.
129,166$5,118: Old Bonds
    (issued in 2002 due to restructuring debt) with maturity in
    2007, bearing interest at 0% until March of 2006, and as of the
    last year, bearing interest at a rate of 10%(1)






57,057$36,118: New Bonds
    (issued in the year 2004 due to restructuring debt) bearing a
    variable interest rate of 4% to 11.25% until October 2009(1)






402,520Less: Discount (net of accumulated
    amortization)






(1,045
)Subtotal


126,047



587,698Accrued interest


6,813



12,594Total payable bonds

Ps.
132,860


Ps.
600,292$150,000 Senior notes issued on
    December 20, 2006 with maturity in 2014, bearing interest
    at fixed rate of 11% per annum, payable semi-annually as from
    June 15, 2007(2)

Ps.
1,631,325


Ps.     (1)
    
    On December 20, 2006, Maxcom delivered an irrevocable notice of
    redemption with respect to these bonds, in each case at a
    redemption price equal to 101% of the aggregate principal amount
    plus accrued and unpaid interest. At the same time, Maxcom
    effected a satisfaction and discharge under the terms of the
    relevant indentures by transmitting payment of the aggregate
    principal amount of the redeemed notes together with the premium
    amount and accrued interest through the redemption date.In accordance with the terms of the indenture governing these
    bonds, satisfaction and discharged served to discharge the
    indenture. Thus, the debt was paid on that date and the
    indenture ceased to be of any further force or effect
    thereafter. Consequently, for accounting purposes the company
    was legally released by the note holders from being the primary
    obligor for this indebtedness. As a result, we recognized a loss
    on extinguishment of debt in the amount of Ps. 17 million
    in 2006.(2)
    
    On December 20, 2006, the Company issued debt instruments
    denominated Bonds in the international markets in
    the amount of $150,000 in accordance with Rule 144A and
    Regulation S, both part of the U.S. Securities Act of 1933.       F-19




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    pari-passu
                NOTE 12 
    LONG
    TERM BANK
    LOANS:    Short term portion:IXE Banco, S. A.(1)

Ps.
49,502Banco Mercantil del Norte, S. A.(2)


19,847Ps.
69,349Long term portion:IXE Banco, S. A.

Ps.
26,040Banco Mercantil del Norte, S.
    A.


56,237Ps.
82,277  F-20




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    (1)
    
    The Company had two unsecured credits with IXE Banco, S. A.. One
    was taken out in April of 2005 for a term of 24 months; the
    second was taken out in October of 2005 for a term of
    19 months. For both credits the monthly interest rate is
    estimated based on the EIIR plus 3.0 percentage points and will
    be paid-off by equal monthly amortizations of principal and
    interest on unpaid balances. The credit was paid in advance in
    December 2006.(2)
    
    Unsecured line of credit taken out with Banco Mercantil del
    Norte, S. A. in October of 2005. This line of credit bears
    monthly interest at the EIIR plus 3.0 percentage points.
    The line of credit was taken out for a term of 48 months.
    The credit was paid in advance in December 2006.    NOTE 13 
    POSITION
    IN FOREIGN
    CURRENCY:    2006


2005U.S. dollars:Assets

$
69,050


$
15,351Liabilities


(174,234
)


(79,938
)Net liabilities in U.S. dollars

$
(105,184
)

$
(64,587
)Exchange rate at end of the year
    (Ps. per U.S.$1.00)

Ps.
10.88


Ps.
10.71     NOTE 14 
    DERIVATIVE
    FINANCIAL
    INSTRUMENTS-    Bulletin C-10
      NOTE 15 
    LABOR
    OBLIGATIONS UPON
    RETIREMENT:   F-21




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Bulletin D-3
    2006


2005a. Seniority premiums:Obligations due to current benefits

Ps.
973


Ps.
626Less: assets of the plan






Current net liabilities


973



626Less: projected net liabilities


(1,387
)


(1,270
)Additional liabilities

Ps.



Ps.
Obligation for projected benefits

Ps.
1,125


Ps.
740Plus (less): Items pending of
    amortization in 22 and 24 years:






Net transition asset


508



530Profit due to the changes in
    assumptions


(246
)


Projected net liabilities

Ps.
1,387


Ps.
1,270Net cost for the period:Labor cost

Ps.
227


Ps.
225Financial cost


29



21Transition asset amortization


(22
)


(22
)Total net cost for the period(*)

Ps.
234


Ps.
224b. Termination of
    employment:Obligations due to current benefits

Ps.
19,581


Ps.
16,100Less: assets of the plan






Current net liabilities


19,581



16,100Less: projected net liabilities


(5,059
)


(702
)Additional liabilities

Ps.
14,522


Ps.
15,398Obligation for projected benefits

Ps.
25,979


Ps.
21,270Plus (less): Items pending of
    amortization in 22 and 24 years






Net transition liability


(19,556
)


(20,568
)Loss due to changes in assumptions


(1,364
)


Projected net liabilities

Ps.
5,059


Ps.
702Net cost for the period:Labor cost

Ps.
2,651


Ps.
2,617Finance cost


819



788Amortization of transition of
    assets


1,004



1,003Total net cost for the period(*)

Ps.
4,474


Ps.
4,408  F-22




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    (*)
    
    The net cost of the period was Ps.4,690 and it was determined in
    the same manner as the obligations for projected benefits, using
    an expected real rate of yield of 4% and an average increase of
    salaries of 1.5%, see Note 5m.    2006


2005Obligations due to current
    benefits for termination of labor relationships

Ps.
19,581


Ps.
16,100Projected net liabilities for
    seniority premiums


1,387



1,270Total labor obligations upon
    retirement

Ps.
20,968


Ps.
17,370   NOTE 16 
    SHAREHOLDERS
    EQUITY:    Dirección
    General de Inversión Extranjera
    Bulletin C-11
    
    6,088,896 shares of the
    A-1 series
    in shares of the series A to at the rate of one to one;
    10,181,950 shares of the B-1 series in shares of the
    series B to the rate of one to one;
    220,714,874 shares of the N-1 series in shares of the
    series N to the rate of one to one, and
    26,867,820 shares of the N-2 series in share o the N2 to
    the rate of one to one. F-23




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
     Series and Class of Shares:

2006


2005


2004Issued and outstanding:A
    Series Class I (fixed portion)


1,528,827



1,528,827



1,528,827A
    Series Clase II (variable portion)


15,760,793



2,979,817



2,979,817A1
    Series Clase II (variable portion)






6,088,896



6,088,896B
    Series Clase II (variable portion)


16,611,595







B1
    Series Clase II (variable portion)






10,181,950



10,181,950N
    Series Clase II (variable portion)


448,433,563



8,861,834



10,331,670N1
    Series Clase II (variable portion)






220,714,874



219,245,038N2
    Series Clase II (variable poriton)






26,867,820



26,867,820Subtotal


482,334,778



277,224,018



277,224,018Authorized shares not outstanding:(treasury shares)N Series


45,901,176



3,024,011



3,361,483N1 Series






23,110,943



22,679,507Subtotal


45,901,176



26,134,954



26,040,990Total authorized shares


528,235,954



303,358,972



303,265,008     2006


2005Capital stock

Ps.
2,863,807


Ps.
2,524,094Restatement effect


343,125



331,759Total capital stock

Ps.
3,206,932


Ps.
2,855,853     Ley General de Sociedades
    Mercantiles
     F-24




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
          inter alia: paid-up
        NOTE 17 
    STOCK
    OPTION
    PLAN:  Stock option plan
   F-25




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
        Original


ModifiedPlan


PlanRequisite service period(1)


5 years



3 yearsFair value on modification date

$
0.00


$
0.09Exercise price

$
0.50


$
0.31Unrecognized compensation cost in
    July 2006 (in dollars: $0 x 23,837,331 options)


0



n/a     (1)
    
    At the modification date most of the awards were already vested.    Fair value of modified option in
    July 2006

$
0.09Fair value of original option in
    July 2006

$
0.00Incremental value of modified
    option in July 2006

$
0.09Incremental value of modified
    option in July 2006

$
0.09Unrecognized compensation cost for
    original option


0.00Total compensation cost to be
    recognized

$
0.09       Plan for the


PennyEmployees New


Chairman of


Warrants forStock Option Plan


the Board


Board Members


TotalGranted


26,485,923



5,716,580



775,000



32,977,504Expected forfeitures


(2,648,592
)










(2,648,592
)Outstanding authorized options


1,882,164







145,777



2,027,941Options vested per year


5,959,333



1,429,145



124,569



7,513,047     Black-Scholes assumptions
  Vesting Period

Volatility


Exercise Price


Risk Free Rate


Fair Value3 years


30
%

$
0.31



4.37
%

$
0.09  F-26




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Executive plan
  New stock option plan for executives
  Members of the Board of Directors and members of
    various committees
    Signing bonuses and other bonuses for officers or
    directors
      2006


2005


2004Weighed





Weighed-





Weighed-Average





Average





AverageExercise





Exercise





ExerciseOptions


Price


Options


Price


Options


PriceOutstanding at beginning of year


18,099


$
0.65



4,465


$
1.14



4,377


$
1.16Granted


26,147



0.31



13,712



0.49



188



0.01Exercised


0



0



0



0.00



(100
)


0.01Cancelled


(18,099
)


0.65



(78
)


0.01



0



0.00Outstanding at the end of the year


26,147



0.31



18,099



0.65



4,465



1.14Options exercisable at the end of
    the year


6,537



0.31



7,226



0.71



2,675



1.36Weighted-average of options
    granted during the year (nominated in U.S. dollars)





$
0.31






$
0.00






$
0.00    Options (warrants) for services rendered to the
    Company
  3 4
 F-27




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    NOTE 18 
    REVENUE
    BY GEOGRAPHICAL
    LOCATION:    Metropolitan


Central-Services

Area


South


North


TotalYear ended on December 31,
    2006:Local

Ps.
900,668


Ps.
371,307


Ps.



Ps.
1,271,975Long distance


212,156



117,226



27,428



356,810Rent of dedicated links


330



151







481Sale of client equipment


5,842



8,058







13,900Lease of capacity


35,427











35,427Ps.
1,154,423


Ps.
496,742


Ps.
27,428


Ps.
1,678,593Assets

Ps.
5,747,883


Ps.
366,419


Ps.
447,470


Ps.
6,561,772Accumulated depreciation

Ps.



Ps.



Ps.




(Ps.1,679,397
)Total assets

Ps.
5,747,883


Ps.
366,419


Ps.
447,470


Ps.
4,882,375Acquisition of telephone network
    systems and equipment

Ps.
630,644


Ps.
129,926


Ps.
670


Ps.
761,240   Metropolitan


Central-Services

Area


South


North


TotalYear ended December 31, 2005:Local

Ps.
484,436


Ps.
315,799


Ps.



Ps.
800,235Long distance


198,434



167,610







366,044Rent of dedicated links


345



497







842Sale of client equipment


2,776



3,094







5,870Lease of capacity


23,253











23,253Other


860











860Ps.
710,104


Ps.
487,000


Ps.



Ps.
1,197,104Assets

Ps.
4,407,183


Ps.
174,039


Ps.



Ps.
4,581,222Accumulated depreciation

Ps.



Ps.



Ps.



Ps.
(1,293,432
)Total assets

Ps.
4,407,183


Ps.
174,039


Ps.



Ps.
3,287,790Acquisition of telephone network
    systems and equipment

Ps.
617,054


Ps.
200,873


Ps.



Ps.
817,927   F-28




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Metropolitan


Central-Services

Area


south


North


TotalYear ended December 31, 2004:Local

Ps.
481,518


Ps.
278,942


Ps.



Ps.
760,460Long distance


94,822



50,552







145,374Rent of dedicated links


482



981







1,463Sale of client equipment


3,812



2,101







5,913Lease of capacity


19,039











19,039Other


1,264











1,264Ps.
600,937


Ps.
332,576


Ps.



Ps.
933,513Assets

Ps.
3,938,389


Ps.
70,255


Ps.



Ps.
Accumulated depreciation

Ps.



Ps.



Ps.



Ps.
(1,158,368
)Total assets

Ps.
3,938,389


Ps.
70,255


Ps.



Ps.
2,863,912Acquisition of telephone network
    systems and equipment

Ps.
386,233


Ps.
23,707


Ps.



Ps.
409,940     Year Ended on December 31,2006


2005


2004Voice

Ps.
1,302,910


Ps.
967,852


Ps.
769,365Data


76,467



53,478



4,929Wholesale


299,216



175,774



119,219Total revenues

Ps.
1,678,593


Ps.
1,197,104


Ps.
933,513     NOTE 19 
    INCOME
    TAX, ASSET TAX AND TAX LOSS
    CARRYFORWARDS:        2006


2005


2004Asset tax incurred

Ps.



Ps.
661


Ps.
28,963Deferred income tax


57,875



27,024



1,181Total provision

Ps.
57,875


Ps.
27,685


Ps.
30,144    F-29




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
      Profit before tax provisions

Ps.
29,668Income tax rate


x 29
%Income tax provision


8,604Plus (less) tax effect of the
    permanent items:Non- deductible expenses


1,254Inflationary annual adjustment


14,267Inflation restatement in the
    income statement


8,884Cancellation of allowance on Asset
    tax for prior years(1)


30,531Other permanent items


(5,665
)Income tax provision adjusted by
    permanent items

Ps.
57,875Effective tax rate =
    195%     (1)
    
    Through December 31, 2005, the Company had considered that
    it had possibilities of recovering the asset tax paid in prior
    years, based on the results from legal proceedings that had
    initiated, considering the amendment in the previous Asset Tax
    Law, which allowed deduction of liabilities within the
    computation of net assets. However, during the last quarter of
    year 2006, the conditions of the legal process radically changed
    and, along with the changes in the Asset Tax Law, effective
    beginning January 1, 2007, which now precludes the
    inclusion of the liabilities to determine the asset tax base,
    the Company assessed that there are not enough elements to
    obtain a favorable resolution, and decided, on a conservative
    basis, to record a valuation allowance in the total amount of
    such tax. F-30




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
     2006


2005Current:Allowance for doubtful accounts

Ps.
25,024


Ps.
25,124Prepaid expenses


(16,205
)


(31,117
)Provisions


64,086



73,262Total current


72,905



67,269Non-current:Telephone network, equipment and
    leasehold improvements, frequency rigths, intangible assets, and
    preoperatingexpenses  Net


(232,796
)


(225,224
)Asset tax paid in prior years


34,573



34,573Tax loss carry forwards


188,406



99,816Total non-current


(9,817
)


(90,835
)Net deferred tax asset
    (liabilities) before valuation allowance


63,088



(23,566
)Tax losses and asset tax valuation
    allowance


(148,571
)


(4,042
)Deferred income tax liabilities

Ps.
(85,483
)

Ps.
(27,608
)       Year ofYear of Loss

Amount


Maturity1999

Ps.
15,857



20092000


71,980



20102001


74,481



20112002


246,857



20122003


30,978



20132004


69,621



20142005


101,108



20152006


61,996



2016Ps.
672,878    F-31




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    NOTE 20 
    COMMITMENTS
    AND
    CONTINGENCIES:          2007

Ps.
48,7842008


46,7552009


41,6502010


41,1912011 and thereafter:


84,526Ps.
267,906         2007

$
1,7592008


1,7592009


1,7592010


1,7592011 and thereafter


3,518$
10,554         2007

Ps.
9,0202008


8,0042009


4,717Total

Ps.
21,741  F-32




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
                        30-year
  30-year
   F-33




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
      NOTE 21 
    SUBSEQUENT
    EVENTS:      NOTE 22 
    SIGNIFICANT DIFFERENCES BETWEEN MEXICAN AND THE UNITED STATES
    GENERALLY ACCEPTED ACCOUNTING
    PRINCIPLES:
     F-34




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Years Ended December 31,2006


2005


2004Net loss under Mexican GAAP

Ps.
(28,207
)

Ps.
(74,126
)

Ps.
(138,708
)Adjustments:Amortization of pre-operating
    expenses(a)


30,870



37,773



38,100Capitalization of interest(b)


48,136



(1,167
)


(810
)Amortization of capitalized
    interest(b)


(26,153
)


2,699



1,854Installation revenues and related
    costs(c)


827



3,126



(21,070
)Installation costs not charged to
    customers(d)


(205,521
)


(66,898
)


(68,438
)Debt restructuring(e)


189,869



50,587



1,460,360Capitalized internal compensation
    cost(f)


138



138



138Spin-off and sale of subsidiary(g)






226,758



Retirement obligations(h)


(875
)






Reversal of SAB 108(k)


2,925







Total US GAAP adjustments


40,216



253,016



1,410,134Net income under U.S. GAAP

Ps.
12,009


Ps.
178,890


Ps.
1,271,426   As of December 31,2006


2005Shareholders equity
    (deficit) under Mexican GAAP

Ps.
2,194,426


Ps.
1,856,151Accumulated adjustments:Preoperating expenses(a)


(377,751
)


(377,751
)Amortization of preoperating
    expenses(a)


282,974



252,104Capitalization of interest(b)


117,477



69,341Depreciation of capitalized
    interest(b)


(38,986
)


(12,833
)Installation revenues and related
    costs(c)


(64,790
)


(65,617
)Installation costs not charged to
    customers(d)


(504,106
)


(298,585
)Debt restructuring(e)






(189,869
)Capitalized internal compensation
    cost(f)


(2,202
)


(2,340
)Retirement obligations(h)


(875
)


SAB 108 initial effects(i)


6,779



SAB 108 effects for the
    year(k)


2,925



Total U.S. GAAP adjustments

Ps.
(578,555
)

Ps.
(625,550
)Shareholders equity
    (deficit) under U.S. GAAP

Ps.
1,615,871


Ps.
1,230,601  F-35




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    Year Ended December 31,2006


2005Balance at the beginning of the
    year

Ps.
1,230,601


Ps.
1,051,711Net income (loss) under U.S. GAAP


12,009



178,890Increase in capital stock


351,079



SAB 108 initial effects(i)


6,779



Stock option plan


15,403



Balance at the end of the year

Ps.
1,615,871


Ps.
1,230,601   I.
    Explanation
    of reconciling items                         F-36




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
        3 4 3 4 3 4
          Bulletin C-9
       F-37




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
          Bulletin D-3 Bulletin D-3
               F-38




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
    roll-over
    Period in Which the


Period in Which the


Period in Which theMisstatement


Misstatement


Misstatement


AdjustmentOriginated(1)


Originated(1)


Originated(1)


RecordedYear Ended


Year Ended


Year Ended


as ofDecember 31,


December 31,


December 31,


January 1,2003


2004


2005


2006Labor liabilities(2)

Ps.
(15,397
)

Ps.



Ps.
(624
)

Ps.
(16,021
)Capitalized interest(3)


(4,410
)


(1,263
)


591



(5,082
)Increasing-debt rate(4)






(3,549
)


(8,020
)


(11,569
)Stock-option plan(5)






(581
)


(2,785
)


(3,366
)Embedded derivatives(6)










7,028



7,028Debt restructuring(7)






132,612



6



132,618Installation costs not charged(7)






(107,471
)


1,535



(105,936
)Installation revenues and costs(8)










11,173



11,173Other(9)


10,935



(9,189
)


(3,812
)


(2,066
)Deferred income taxes(10)














Impact on net income(11)

Ps.
(8,872
)

Ps.
10,559


Ps.
5,092Retained earnings(12)













Ps.
6,779     (1)
    
    We previously quantified these errors under the roll-over method
    and concluded that they were immaterial-individually and in the
    aggregate.(2)
    
    We were not recognizing this difference for severance indemnity
    as required by U.S. generally accepted accounting principles
    (see reconciling item h.). As a result of this error, our
    severance indemnity expense was understated by
    Ps.15.4 million in 2003 and by Ps.0.6 million in 2005,
    no expense recognition is applicable for 2004. We recorded a
    Ps.16 million increase in our liability for severance
    indemnity as of January 1, 2006 with a corresponding
    reduction in retained earnings to correct these misstatements.(3)
    
    We incorrectly amortized capitalized interest expenses in 2005
    and prior years. As a result of this error, our expenses were
    understated in 2003 by Ps.4.1 million, in 2004 by Ps.1.3
    and overstated by Ps.0.6 million in 2005. We recorded a
    Ps.5.1 million decrease in our capitalized interest as of
    January 1, 2006 with a corresponding reduction in retained
    earnings to correct these misstatements.(4)
    
    We were not adjusting our expenses for increasing-debt rate as
    required by U.S. generally accepted accounting principles to the
    interest method. As a result of this error, our interest expense
    was understated by Ps.3.6 million in 2004 and by
    Ps.8.0 million in 2005. We recorded a Ps.11.6 million
    increase in our liability for interest payable as of
    January 1, 2006 with a corresponding reduction in retained
    earnings to correct these misstatements (see k below for
    reversal in 2006).(5)
    
    We were not recognizing compensation cost expense as required by
    U.S. generally accepted accounting principles. As a result of
    this error, our compensation expense was understated by
    Ps.0.6 million in 2004 and by Ps.2.8 million in 2005.
    We recorded a Ps.3.4 million increase in our
    additional-paid in capital for stock- F-39




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  option plans as of January 1, 2006 with a corresponding
    reduction in retained earnings to correct these misstatements.(6)
    
    We were not recognizing the effect in income generated by
    embedded derivatives as required by U.S. generally accepted
    accounting principles. As a result of this error in both GAAPs
    in 2005, our income was understated by Ps.7.0 million. We
    recorded a Ps.7.0 million increase in our assets as of
    January 1, 2006 with a corresponding increment in retained
    earnings to correct these misstatements. This balance does not
    represent a difference between GAAPs, however for Mexican GAAP
    purposes this effect was immaterial for being adjusted (see k
    for reversal in 2006).(7)
    
    We were incorrectly presenting the accumulated amortization
    related to debt restructuring and installation costs not charged
    to customers. As a result of both reclassification errors, our
    income was understated by Ps.8.1 million in 2004 and by
    Ps.1.5 million in 2005 (amounts presented net). We recorded
    a Ps.9.6 million increase in our assets as of
    January 1, 2006 with a corresponding increment in retained
    earnings to correct these misstatements.(8)
    
    We were incorrectly recognizing the effect in income generated
    by the amortization installation revenues and costs. As a result
    of this error, our income was understated by
    Ps.11.2 million in 2005. We recorded a Ps.11.2 million
    increase in our assets as of January 1, 2006 with a
    corresponding increment in retained earnings to correct these
    misstatements.(9)
    
    We incorrectly recorded minor entries representing preoperating
    expenses, leasehold improvements and revenue recognition. As a
    result of these errors, our expense was overstated by
    Ps.1.7 million in 2004 and understated by
    Ps.3.8 million in 2005. We recorded a Ps.2.1 million
    increase in our liabilities for these concepts as of
    January 1, 2006 with a corresponding reduction in retained
    earnings to correct these misstatements.(10)
    
    No deferred taxes were calculated in the application of the
    SAB 108 as those balances would represent a deferred tax
    asset for the net balance to be adjusted on January 1,
    2006, that is not deemed recoverable and should be fully
    reserved for accounting purposes.(11)
    
    Represents the net over-statement of net income for the
    indicated periods resulting from these misstatements(12)
    
    Represents the net reduction to retained earnings recorded as of
    January 1, 2006 to record the initial application of
    SAB 108.      December 31,2006Preoperating expenses

Ps.
(1,615
)Increasing debt rate(1)


11,568Embedded derivatives(2)


(7,028
)Ps.
2,925     (1)
    
    These notes were called in advance during 2006 and thus,
    outstanding payable balances under U.S. GAAP were therefore
    eliminated.(2)
    
    In 2006, the Company started recognizing embedded derivatives in
    local books, therefore reconciling item should be reversed
    accordingly. F-40




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
   II.
    Significant
    Disclosures        Years Ended December 31,2006


2005


2004Basic and diluted earnings per
    share:Net income

Ps.
12,009


Ps.
178,890


Ps.
1,271,426Denominator:Weighted average shares used in
    basic computation


442,928



403,521



293,032Add: dilutive impact of stock
    options and warrants


24,700







Weighted average shares used in
    basic computation


467,628



403,521



293,032Earnings per share, basic


0.03



0.44



4.34Earnings per share, diluted


0.03



0.44



4.34           
    borrow money;
    pay dividends on our capital stock;
    purchase stock or repay subordinated indebtness;
    sell assets; and
    consolidate or merge into other companies.   F-41




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
            SFAS 109


SFAS 109Applied to


Applied toMexican GAAP


U.S. GAAPBalances


Balances


TotalDecember 31, 2006Deferred assets:Bad debt allowance

Ps.
25,024






Ps.
25,024Asset tax payments


34,573







34,573Tax loss carryforwards


188,406







188,406Accruals


64,086







64,086Installation revenues






18,141



18,141Installation costs not charged to
    customers






141,149



141,149Deferred tax assets


312,089



159,290



471,379Deferred liabilities:Prepaid expenses


(16,205
)






(16,205
)Telephone network equipment and
    leasehold improvements, frequency rights, intangible assets and
    preoperating expenses


(232,796
)


5,422



(227,374
)Deferred tax liabilities


(249,001
)


5,422



(243,579
)Net deferred income tax asset
    before valuation allowance


63,088



164,712



227,800Valuation allowance


(148,571
)


(164,712
)


(313,283
)Ps.
(85,483
)

Ps.



Ps.
(85,483
)   F-42




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  SFAS 109


SFAS 109Applied to


Applied toMexican GAAP


U.S. GAAPBalances


Balances


TotalDecember 31, 2005Deferred assets:Bad debt allowance

Ps.
25,124






Ps.
25,124Asset tax payments


34,573







34,573Tax loss carryforwards


99,816







99,816Accruals


73,262







73,262Installation revenues






18,373



18,373Installation costs not charged to
    customers






83,603



83,603Deferred tax assets


232,775



101,976



334,751Deferred liabilities:Prepaid expenses


(31,117
)






(31,117
)Telephone network equipment and
    leasehold improvements, frequency rights, intangible assets and
    preoperating expenses


(225,224
)


20,015



(205,209
)Deferred tax liabilities


(256,341
)


20,015



(236,326
)Net deferred income tax asset
    before valuation allowance


(23,566
)


121,991



98,425Valuation allowance


(4,042
)


(121,991
)


(126,033
)Ps.
(27,608
)

Ps.



Ps.
(27,608
)  F-43




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  III.
    Additional Disclosures
        Year Ended December 31,2006


2005


2004Operating activities:Net income (loss) under U.S. GAAP


12,009



178,890



1,271,426Adjustments to reconcile net income
    (loss) to net cash flow provided by operating activities:Depreciation and amortization


161,644



252,442



347,885Gain on restructuring of debt










(1,402,565
)Fixed asset write-offs






11,944



Allowance for doubtful accounts


35,232



29,785



36,985Monetary gain


(20,724
)


(22,985
)


(118,481
)Allowance for inventory of
    obsolescence






318



1,124Deferred Income Tax


57,875



27,024



Employee benefits


4,474







Stock option plan


15,403







Loss on sale of fixed assets


1,319







Other


(964
)






Foreign currency exchange (gain)
    loss


(87,492
)


(18,876
)


106,373178,776



458,542



242,747Changes in operating assets and
    liabilities:Accounts receivable


(309,912
)


(103,094
)


(3,902
)Inventory


(18,466
)


(4,184
)


6,553Prepaid expenses


13,754



(13,441
)


(14,302
)Accrued interest










787Accrued expenses and other accounts
    payable


24,351



149,760



(80,578
)Cash flow (used in) provided by
    operating activities


(111,497
)


487,583



151,305Financing activities:Restricted cash


(14,629
)


11,626



(19,609
)Capital increase  Net of
    equity issuance cost


344,402







Bank financing and debt payments


(449,005
)


135,267



169,798Senior notes issued  Net
    of debt issuance cost


1,590,455







Cash flow provided by financing
    activities


1,471,223



146,893



150,189Investing activities:Acquisition of fixed assets


(744,777
)


(396,017
)


(257,581
)Proceeds on sale of fixed assets


4,268







Purchase of Telereunion, net of
    cash acquired


(97,508
)






Acquisition of intangible assets


(34,088
)


(57,390
)


Cash flow used in investing
    activities


(872,105
)


(453,407
)


(257,581
)Cash and cash equivalents:Effect of inflation and exchange
    rate changes on cash and cash equivalents


(7,592
)


(13,300
)


(26,408
)Net increase (decrease) increase in
    cash and cash equivalents


480,029



167,769



17,505Cash and cash equivalents at
    beginning of the year


232,479



64,710



47,205Cash and cash equivalents at end of
    the year


712,508



232,479



64,710Interest paid

Ps.
134,654


Ps.
72,831


Ps.
24,982Taxes paid

Ps.
1,345


Ps.
525


Ps.
14,084Supplemental disclosures of
    non-cash investing and financing activities:Reduction of notes payable from
    troubled debt restructuring

Ps.



Ps.



Ps.
1,534,150  F-44




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
               F-45




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
        instrument-by-instrument
    No. 06-3 (EITF 06-03), EITF 06-03
 F-46




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  EITF 06-03 EITF 06-3
     F-47




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  NON-GUARANTOR SUBSIDIARIESMaxcom


Maxcom








SierraMaxcom


Corporativo


Servicios


OOP


MSF


USA


TV


TET


Telereunión


USA


Telscape


Elimination


ConsolidatedBalance sheet as of
    December 31, 2006:Cash and cash equivalents and
    Current restricted cash

Ps.
723,685



900



1,083



31



3,323











10



4,723



1,365











735,120Accounts receivable  net


423,503



29,008



212,474



43,797



161,664



110



50



649



55,307



12,368



2,081



(473,332
)


467,677Inventory  net


34,493















































34,493Prepaid expenses


62,078



254



952



10



















49



15











63,358Investment in subsidiaries


295,461







1,606



































(297,067
)


Frequency rights  net


85,172















































85,172Telephone network system and
    Equipment net


2,810,128































201,997



10,468



20,223







3,042,816Preoperating expenses 
    net


94,777















































94,777Intangible assets  net


322,371















































322,371Obligations






1,542



12,980







































14,522Deposits


356



377



7







4,286















715



14











5,757Deferred taxes










2,306







































2,306Other assets


14,022



































(16
)










14,006Total assets

Ps.
4,866,046


Ps.
32,081


Ps.
231,408


Ps.
43,838


Ps.
169,273


Ps.
110


Ps.
50


Ps.
659


Ps.
262,791


Ps.
24,214


Ps.
22,304


Ps.
(1,048,609
)

Ps.
4,882,375Total liabilities

Ps.
2,671,620


Ps.
33,094


Ps.
228,887


Ps.
42,301


Ps.
11,545


Ps.



Ps.



Ps.
590


Ps.
175,593


Ps.
11,729


Ps.



Ps.
487,410


Ps.
2,687,949Shareholders Equity:Capital Stock and Additional
    Paid-In Capital


3,450,859



90



64



53



165,284



122



53



52



677,754



12,572



94,327



(950,371
)


3,450,859Accumulated deficit


(1,256,433
)


(1,103
)


2,457



1,484



(7,554
)


(12
)


(3
)


17



(590,556
)


(86
)


(72,023
)


667,379



(1,256,433
)Total shareholders equity


2,194,425



(1,013
)


2,521



1,537



157,730



110



50



69



87,198



12,486



22,304



(282,992
)


2,194,426Total liabilities and
    Shareholders  equity

Ps.
4,866,046


Ps.
32,081


Ps.
231,408


Ps.
43,838


Ps.
169,275


Ps.
110


Ps.
50


Ps.
659


Ps.
262,791


Ps.
24,219


Ps.
22,304


Ps.
(1,048,609
)

Ps.
4,882,375Total shareholders equity
    under Mexican GAAP

Ps.
2,194,426


Ps.
(1,013
)

Ps.
(2,521
)

Ps.
1,537


Ps.
157,730


Ps.
110


Ps.
50


Ps.
69


Ps.
87,198


Ps.
12,486


Ps.
22,304


Ps.
(282,991
)

Ps.
2,194,426  F-48




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  NON-GUARANTOR SUBSIDIARIESMaxcom


Maxcom





SierraMaxcom


Servicios


Corporativo


OOP


TET


MSF


USA


TV


Telereunión


USA


Telscape


Elimination


ConsolidatedPreoperating expenses


(377,751
)














































(377,751
)Amortization of preoperating
    expenses


282,974















































282,974Capitalization of interest


117,477















































117,477Amortization of capitalized interest


(38,986
)














































(38,986
)Amortization of frequency rightsInstallation revenues


(64,790
)














































(64,790
)Installation costs


(504,106
)














































(504,106
)Debt restructuringCapitalized internal compensation
    cost


(2,202
)














































(2,202
)Retirement obligation


(875
)














































(875
)SAB 108 initial effect


6,779















































6,779SAB effects fo the year


2,925















































2,925Total shareholders equity
    under US. GAAP


1,615,871















































1,615,871  F-49




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  NON-GUARANTOR SUBSIDIARIESMaxcom


Maxcom





SierraMaxcom


Corporativo


Servicios


OOP


TET


MSF


USA


TV


Telereunión


USA


Telscape


Elimination


ConsolidatedStatements of Operations for the
    year ended December 31, 2006:Revenues

Ps.
1,654,168


Ps.
43,532


Ps.
326,039


Ps.
60,827


Ps.
874














Ps.
85,109


Ps.
13,658






Ps.
(505,584
)

Ps.
1,678,593Operating cost and expenses


(1,528,448
)


(42,283
)


(322,874
)


(59,188
)


(854
)


4,294











(69,199
)


(14,615
)






505,584



(1,527,530
)Integral (cost) income of financing


(118,105
)


11



(96
)


(110
)


(3
)


4,202



(4
)


(2
)


10,108



769



(69
)






(103,299
)Other income (expenses)


(35,792
)


(295
)


1,745



(49
)






(13,244
)










1



28







(28,365
)


(75,971
)Net (loss) income

Ps.
(28,207
)

Ps.
965


Ps.
4,871


Ps.
1,480


Ps.
17


Ps.
(4,748
)

Ps.
(4
)

Ps.
(2
)

Ps.
26,018


Ps.
(163
)

Ps.
(69
)

Ps.
(28,365
)

Ps.
(28,207
)Net (loss) income for the year
    under Mexican GAAP

Ps.
(28,207
)

Ps.
965


Ps.
4,871


Ps.
1,480


Ps.
17


Ps.
(4,748
)

Ps.
(4
)

Ps.
(2
)

Ps.
26,018


Ps.
(163
)

Ps.
(69
)

Ps.
(28,365
)

Ps.
(28,207
)Preoperating expensesAmortization of preoperating
    expenses


30,870















































30,870Capitalization of interest


48,136















































48,136Amortization of capitalized Interest


(26,153
)














































(26,153
)Installation revenues


827















































827Installation costs


(205,521
)














































(205,521
)Debt restructuring


189,869















































189,869Capitalized internal compensation
    cost


138















































138Retirement obligations


(875
)














































(875
)Reversal of SAB 108


2,925















































2,925Net loss (income) for the year
    Under U.S. GAAP

Ps.
12,009














































Ps.
12,009  F-50




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  NON-GUARANTOR SUBSIDIARIESServicios


Maxcom


Maxcom





SierraMaxcom


Servicios


Corporativo


OOP


TET


Financieros


USA


TV


Telereunión


USA


Telscape


Elimination


ConsolidatedStatement of Cash Flows under U.S.
    GAAP for the Year Ended December 31, 2006:Net (loss) income the year under
    U.S. GAAP

Ps.
12,009


Ps.
4,871


Ps.
965


Ps.
1,480


Ps.
17


Ps.
(4,748
)

Ps.
(4
)

Ps.
(2
)

Ps.
26,018


Ps.
(163
)

Ps.
(69
)

Ps.
(28,365
)

Ps.
12,009Depreciation and amortization


153,513











































8,131



161,644Other adjustments to reconcile net
    income to cash provided by operating activities


(40,807
)










































45,930



5,123Net change in working capital


(83,879
)










































(206,394
)


(290,273
)Resources (used in) provided by
    Operating activities


40,836



4,871



965



1,480



17



(4,748
)


(4
)


(2
)


26,018



(163
)


(69
)


(180,698
)


(111,497
)Resources used in financing
    activities


1,273,479











































197,744



1,471,223Resources (used in) provided by
    investing activities


(830,524
)










































(41,581
)


(872,105
)Effect of inflation on cash and
    cash equivalents


(7,286
)










































(306
)


(7,592
)Cash and cash equivalents:Net increase (decrease) in cash and
    cash equivalents


476,505



4,871



965



1,480



17



(4,748
)


(4
)


(2
)


26,018



(163
)


(69
)


(24,841
)


480,029Beginning balances


224,568











































7,911



232,479Ending balances

Ps.
701,073


Ps.
4,871


Ps.
965


Ps.
1,480


Ps.
17


Ps.
(4,748
)

Ps.
(4
)

Ps.
(2
)

Ps.
26,018


Ps.
(163
)

Ps.
(69
)

Ps.
(16,930
)

Ps.
712,508  F-51




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  ServiciosMaxcom


Corporativo


Servicios


OOP


Financieros


Elimination


ConsolidatedBalance sheet as of
    December 31, 2005:Cash and cash equivalents and
    Current restricted cash

Ps.
224,568



681



492



85



6,653







232,479Accounts receivable  net


149,910



147



12,927



2,355



201,747



(141,905
)


225,181Inventory  net


16,027























16,027Prepaid expenses


78,840



417



634



7



6,736



(6,738
)


79,896Restricted cash long term


7,983























7,983Investment in subsidiaries


214,840







57











(214,897
)


Frequency rights  net


89,592























89,592Telephone network system and
    Equipment net


2,167,216























2,167,216Preoperating expenses 
    net


127,262























127,262Retirement Obligations






1,652



13,745















15,397Intangible assets  net


315,830























315,830Other assets


6,195



186



2,160







4,539



(2,153
)


10,927Total assets

Ps.
3,398,263


Ps.
3,083


Ps.
30,015


Ps.
2,447


Ps.
219,675


Ps.
(365,693
)

Ps.
3,287,790Total liabilities

Ps.
1,542,112


Ps.
5,059


Ps.
32,367


Ps.
2,390


Ps.
624


Ps.
(150,913
)

Ps.
1,431,639Shareholders Equity:Capital Stock and Additional Paid-
    In Capital


3,084,378



93



63



53



221,857



(222,066
)


3,084,378Accumulated deficit


(1,228,227
)


(2,069
)


(2,415
)


4



(2,806
)


7,286



(1,228,227
)Total shareholders equity


1,856,151



(1,976
)


(2,352
)


57



219,051



(214,780
)


1,856,151Total liabilities and
    Shareholders  equity

Ps.
3,398,263


Ps.
3,083


Ps.
30,015


Ps.
2,447


Ps.
219,675


Ps.
(365,693
)

Ps.
3,287,789Total shareholders equity
    under Mexican GAAP

Ps.
1,856,151


Ps.
(1,976
)

Ps.
(2,352
)

Ps.
57


Ps.
219,051


Ps.
(214,780
)

Ps.
1,856,151   ServiciosMaxcom


Corporativo


Servicios


OOP


Financieros


Elimination


ConsolidatedPreoperating expenses


(377,751
)






















(377,751
)Amortization of preoperating
    expenses


252,104























252,104Capitalization of interest


69,341























69,341Amortization of capitalized
    interest


(12,833
)






















(12,833
)Installation revenues


(65,617
)






















(65,617
)Installation costs


(298,585
)






















(298,585
)Debt restructuring


(189,869
)






















(189,869
)Capitalized internal compensation
    cost


(2,340
)






















(2,340
)Total shareholders equity
    under US. GAAP


1,230,601



(1,976
)


(2,352
)


57



219,051



(214,780
)


1,230,601   F-52




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  ServiciosMaxcom


Corporativo


Servicios


OOP


Financieros


Elimination


ConsolidatedStatements of Operations for the
    year ended December 31, 2005:Revenues

Ps.
1,196,999


Ps.
39,702


Ps.
281,938










Ps.
(321,534
)

Ps.
1,197,105Operating cost and expenses


(1,179,295
)


(39,618
)


(282,044
)


24



(222
)


321,534



(1,179,621
)Integral (cost) income of financing


(54,357
)


(2
)


18



(40
)


(2,908
)






(57,289
)Other income (expenses)


(37,473
)


(240
)


1,896



20



324



1,152



(34,327
)Net (loss) income

Ps.
(74,126
)

Ps.
(158
)

Ps.
1,808


Ps.
4


Ps.
(2,806
)

Ps.
1,152


Ps.
(74,126
)Net (loss) income for the year
    under Mexican GAAP

Ps.
(74,126
)

Ps.
(158
)

Ps.
1,808


Ps.
4


Ps.
(2,806
)

Ps.
1,152


Ps.
(74,126
)Amortization of preoperating
    expenses


37,773























37,773Capitalization of interest


(1,167
)






















(1,167
)Amortization of capitalized Interest


2,699























2,699Amortization of frequency rights
    Installation revenues


3,126























3,126Installation costs


(66,898
)






















(66,898
)Debt restructuring


50,587























50,588Capitalized internal compensation
    cost


138























138Spin-off and sale of subsidiary


226,758























226,758Net loss (income)For the year Under U.S. GAAP

Ps.
178,890


Ps.
(158
)

Ps.
1,808


Ps.
4


Ps.
(2,806
)

Ps.
1,152


Ps.
178,890   F-53




---



##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  ServiciosMaxcom


Corporativo


Servicios


OOP


Financieros


Elimination


ConsolidatedStatement of Cash Flows under U.S.
    GAAP for the Year Ended December 31, 2005:Net (loss) income

Ps.
178,890


Ps.
(158
)

Ps.
1,808


Ps.
4


Ps.
(2,806
)

Ps.
1,152


Ps.
178,890Depreciation and amortization


252,442























252,442Other adjustments to reconcile net
    income to cash provided by operating activities


27,210























27,210Net change in working capital


29,041



(158
)


1,808



4



( 2,806
)


1,152



458,542Resources (used in) provided by
    Operating activities


697,917



420



(192
)


85



6,653



(217,309
)


487,573Resources used in financing
    activities


146,893























146,893Resources (used in) provided by
    investing activities


676,949



















217,309



(459,640
)Effect of inflation on cash and
    cash equivalents


(7,057
)






















(7,057
)Cash and cash equivalents:Net increase (decrease) in cash and
    cash equivalents


160,803



420



(192
)


85



6,653







167,769Beginning balances


63,764



260



685















64,710Ending balances

Ps.
224,568


Ps.
680


Ps.
493


Ps.
85


Ps.
6,653


Ps.



Ps.
232,479   F-54




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Maxcom


Corporativo


Servicios


Elimination


ConsolidatedBalance sheet as of
    December 31, 2004:Cash and cash equivalents

Ps.
63,764


Ps.
260


Ps.
685


Ps.



Ps.
64,709Current restricted cash


5,973















5,973Accounts receivable  net


158,491



251



15,387



(13,964
)


160,165Inventory  net


12,162















12,162Prepaid expenses


71,316



204



480







72,000Restricted cash long term


13,636















13,636Frequency rights  net


101,368















101,368Telephone network system and
    equipment  net


1,856,137















1,856,137Preoperating expenses 
    net


165,036















165,036Intangible assets  net


393,663















393,665Other assets


22,307



180











22,485Total assets

Ps.
2,863,853


Ps.
895


Ps.
16,552


Ps.
(13,964
)

Ps.
2,867,336Total liabilities

Ps.
1,160,336


Ps.
2,712


Ps.
20,712


Ps.
(19,941
)

Ps.
1,163,818Shareholders Equity:Capital stock and additional
    paid-in-capital


3,534,119



93



63



(156
)


3,534,119Accumulated deficit


(1,830,601
)


(1,909
)


(4,224
)


6,133



(1,830,601
)Total shareholders equity


1,703,518



(1,817
)


(4,160
)


5,977



1,703,518Total liabilities and
    shareholders equity

Ps.
2,863,853


Ps.
896


Ps.
16,551


Ps.
(13,964
)

Ps.
2,867,336Total shareholders equity
    under Mexican GAAP

Ps.
1,703,518


Ps.
(1,817
)

Ps.
(4,160
)

Ps.
5,977


Ps.
1,703,518Preoperating expenses


(377,751
)














(377,751
)Amortization of preoperating
    expenses


214,331















214,331Capitalization of interest


70,508















70,508Amortization of capitalized
    interest


(15,532
)














(15,532
)Installation revenues


(68,743
)














(68,743
)Installation costs


(231,686
)














(231,686
)Debt restructuring


(240,456
)














(240,456
)Capitalized internal compensation
    cost


(2,478
)














(2,478
)Total shareholders equity
    under US GAAP

Ps.
1,051,711


Ps.
(1,817
)

Ps.
(4,160
)

Ps.
5,977


Ps.
1,051,711   F-55




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
  Maxcom


Corporativo


Servicios


Elimination


ConsolidatedStatements of Operations for the
    year ended December 31, 2004:Revenues

Ps.
933,512


Ps.
32,288


Ps.
244,749


Ps.
(277,037
)

Ps.
933,513Operating cost and expenses


(1,093,609
)


(31,431
)


(244,058
)


277,037



(1,092,062
)Integral (cost) income of financing


50,639



(45
)


245







50,838Other income (expenses)


(29,249
)


(666
)


(415
)


(666
)


(30,996
)Net (loss) income

Ps.
(138,707
)

Ps.
146


Ps.
520


Ps.
(666
)

Ps.
(138,707
)Net (loss) income for the year
    Under Mexican GAAP

Ps.
(138,708
)

Ps.
146


Ps.
520


Ps.
(666
)

Ps.
(138,707
)Amortization of preoperating
    expenses


38,100















38,100Capitalization of interest


(810
)














(810
)Amortization of capitalized
    interest


1,854















1,854Installation revenues


(21,070
)














(21,070
)Installation costs


(68,438
)














(68,438
)Debt restructuring


1,460,360















1,460,360Bonus Capitalization


138















138Net income (loss) for the year
    under U.S. GAAP

Ps.
1,271,426


Ps.
146


Ps.
520


Ps.
(666
)

Ps.
1,271,426Statement of Changes in Financial
    Position for the Year Ended December 31, 2004:Net (loss) income

Ps.
(138,707
)

Ps.
146


Ps.
520


Ps.
(666
)

Ps.
(138,707
)Depreciation and amortization


360,071















360,071Net change in working capital


221,364



146



520



(666
)


221,364Resources provided by operating
    activities


287,157



153



685







287,994Financing activities:Issuance of capital stock


620,100















620,100Additional paid in capital


930,130















930,130Proceeds from loans and notes
    payable


(1,450,893
)














(1,450,894
)Resources used in financing
    activities


99,357















99,337Investing activities:Telephone network systems and
    equipment


(369,397
)














(369,397
)Intangible assets


(34,700
)














(34,700
)Other assets


9,352



8











9,361Resources (used in) provided by
    investing activities


(394,745
)


8











(394,745
)Cash and cash equivalents:Net increase (decrease) in cash
    and cash equivalents


16,659



161



685







17,505Beginning balances


47,105



100











47,205Ending balances

Ps.
63,764


Ps.
260


Ps.
685


Ps.



Ps.
64,790  F-56




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##### Table of Contents



MAXCOM
    TELECOMUNICACIONES, S. A. DE C. V. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS (Continued)
      Balance at


Charged toBeginning of


Cost and





Balance at EndPeriod


Expenses


Deductions


of PeriodAllowance for doubtful accounts


2006


Ps.
71.6


Ps.
37.8


Ps.
(39.7
)

Ps.
69.72005


Ps.
67.8


Ps.
25.4


Ps.
(21.7
)

Ps.
71.52004


Ps.
70.4


Ps.
37.9


Ps.
(40.5
)

Ps.
67.8Allowance for obsolete and slow-
    moving supply inventories


2006


Ps.
0.3


Ps.



Ps.



Ps.
0.32005


Ps.
0.3


Ps.



Ps.



Ps.
0.32004


Ps.
0.3


Ps.



Ps.



Ps.
0.3Allowance for obsolete and slow-
    moving network inventories


2006


Ps.
9.8


Ps.



Ps.
(0.1
)

Ps.
9.72005


Ps.
9.7


Ps.



Ps.
0.1


Ps.
9.82004


Ps.
10.8


Ps.



Ps.
(1.1
)

Ps.
9.7Allowance for lease penalty


2006


Ps.



Ps.



Ps.



Ps.
2005


Ps.



Ps.



Ps.



Ps.
2004


Ps.



Ps.



Ps.



Ps.
  F-57




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##### Table of Contents



ITEM 19.
    EXHIBITS  1
.1

Amended and Restated By-laws
    (estatutos) of Maxcom Telecomunicaciones, S.A. de C.V.2
.1

Indenture, dated March 17, 2000,
    among Maxcom Telecomunicaciones, S.A. de C.V., Corporativo en
    Telecomunicaciones, S.A. de C.V. and The Bank of New York, as
    Trustee.

**2
.2

Indenture, dated April 29, 2002,
    among Maxcom Telecomunicaciones, S.A. de C.V., Corporativo en
    Telecomunicaciones, S.A. de C.V., Maxcom Servicios
    Administrativos, S.A. de C.V. and The Bank of New York, as
    Trustee.

*2
.3

Second Supplemental Indenture,
    dated April 29, 2002, among Maxcom Telecomunicaciones, S.A. de
    C.V., Corporativo en Telecomunicaciones, S.A. de C.V., Maxcom
    Servicios Administrativos, S.A. de C.V. and The Bank of New
    York, as Trustee.

*2
.4

Amended and Restated Indenture,
    dated October 8, 2004, among Maxcom Telecomunicaciones, S.A. de
    C.V., Corporativo en Telecomunicaciones, S.A. de C.V., Maxcom
    Servicios Administrativos, S.A. de C.V., Maxcom USA, Inc. and
    The Bank of New York, as Trustee.

******2
.5

Indenture, dated October 8, 2004,
    among Maxcom Telecomunicaciones, S.A. de C.V., Corporativo en
    Telecomunicaciones, S.A. de C.V., Maxcom Servicios
    Administrativos, S.A. de C.V., Maxcom USA, Inc. and The Bank of
    New York, as Trustee.

******2
.6

Senior Note Indenture, dated
    December 20, 2006, among Maxcom Telecomunicaciones, S.A. de
    C.V., Maxcom Servicios Administrativos, S.A. de C.V.,
    Outsourcing Operadora de Personal, S.A. de C.V., Técnicos
    Especializados en Telecomunicaciones, S.A. de C.V., Corporativo
    en Telecomunicaciones, S.A. de C.V., Maxcom SF, S.A. de C.V.,
    Maxcom TV, S.A. de C.V., Maxcom USA, Inc. and Deutsche Bank
    Trust Company Americas.2
.7

Third Amended and Restated
    Securityholders Agreement, dated July 20, 2006, among  Maxcom
    Telecomunicaciones, S.A. de C.V. and certain of its shareholders.3
.1

CPO Trust Agreement effective
    April 25, 2002 among Maxcom., its shareholders and Banco
    Nacional de México, S.A., Institución de Banca
    Múltiple, Grupo Financiero Banamex Accival, acting as
    trustee.

*4
.1

Agreement for the use of
    infrastructure and installation of fiber optic cable on the
    highways between Puebla and Mexico, dated August 18, 1998,
    between Amaritel, S.A. de C.V. (the predecessor of Maxcom
    Telecomunicaciones, S.A. de C.V.) and Iusatel, S.A. de C.V.

**4
.2

Interconnection Agreement for
    long-distance services, dated January 22, 1999, between Amaritel
    and Teléfonos de Mexico (Telmex) valid for a period of two
    years between February 1, 1999 and January 1, 2001. The
    agreement establishes that it would remain in effect after the
    expiration date if no further agreement for its termination or
    renewal has been entered into, in accordance with article 42 of
    the Mexican Telecommunications law.

**4
.3

Local Interconnection Service
    Agreement, dated November 24, 1998, between Amaritel, S.A. de
    C.V. and Teléfonos de Mexico, S.A. de C.V.

**4
.4

Amendment to Local Interconnection
    Service Agreement, dated February 25, 1999, between Amaritel,
    S.A. de C.V. and Teléfonos de Mexico, S.A. de C.V.,
    originally entered into on November 24, 1998.

**4
.5

Metropolitan Network Capacity Sale
    Agreement, dated April 28, 2000, between Maxcom
    Telecomunicaciones, S.A. de C.V. and Metro Net, S.A. de C.V.
    (including amendment dated December 21, 2000).

***4
.6

Telecommunications Service
    Agreement, dated November 15, 1999, between Maxcom and
    Teléfonos de México, S.A. de C.V.

**4
.7

Telecommunications Service
    Agreement, dated March 9, 1999, between Maxcom and Bestel S.A.
    de C.V., according to which Bestel will provide long-distance
    and private calls services to Maxcom.

**4
.8

Concession for the installation
    and operation of telecommunications services granted to
    Amaritel, S.A. de C.V. by the Secretary of Telecommunications
    and Transport on December 20, 1996.

** 106




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##### Table of Contents



4
.9

Amendment to Concession for the
    installation and operation of telecommunications services
    granted to Amaritel by the Secretary of Telecommunications and
    Transport on December 20, 1996, dated September 8, 1999,
    extending the coverage of such concession to include various
    additional municipalities of the State of Mexico.

**4
.10

Amendment to Concession for the
    installation and operation of telecommunications services
    granted to Amaritel by the Secretary of Telecommunications and
    Transport on December 20, 1996, dated December 7, 1999,
    authorizing Maxcom to employ whatever technologies it deems
    appropriate in providing telecommunications services to various
    municipalities.

**4
.11

Amendment to Annex A and B of
    Concession for the installation and operation of
    telecommunications services granted to Amaritel, S.A. de C.V. by
    the Secretary of Telecommunications and Transport on December
    20, 1996, dated September 27, 2001, extending the coverage of
    such concession to include all of Mexico.

**4
.12

Concession for a public
    telecommunications network in telecommunications regions 3, 5
    and 8 granted to Amaritel, S.A. de C.V. by the Secretary of
    Telecommunications and Transport on April 29, 1998.

**4
.13

Concession for the operation of
    point-to-multipoint microwave telecommunications services in
    Region 5 granted to Amaritel, S.A. de C.V. by the Secretary of
    Telecommunications and Transport on April 23, 1998.

**4
.14

Concession for the operation of
    point-to-multipoint microwave telecommunications services in
    Region 3 granted to Amaritel, S.A. de C.V. by the Secretary of
    Telecommunications and Transport on April 23, 1998.

**4
.15

Concession for the operation of
    point-to multipoint microwave telecommunications services in
    Region 8 granted to Amaritel, S.A. de C.V. by the Secretary of
    Telecommunications and Transport on April 29, 1998.

**4
.16

Concessions for the nationwide
    operation of point-to-point microwave telecommunications
    services using five frequency bands in the 56 MHz
    bandwidth, each granted to Amaritel, S.A. de C.V. by the
    Secretary of Telecommunications and Transport on June 4, 1998.

**4
.17

Concessions for the nationwide
    operation of point-to-point microwave telecommunications
    services using two frequency bands in the 100 MHz
    bandwidth, each granted to Amaritel, S.A. de C.V. by the
    Secretary of Telecommunications and Transport on June 4, 1998.

**4
.18

Amendment to Concession for the
    operation of point-to-multipoint telecommunications services in
    Regions 3, 5, 8 granted to Amaritel, S.A. de C.V. by the
    Secretary of Telecommunications and Transport on April 1, 1998,
    dated October 12, 1999, regarding the start date for the
    initiation of services.

**4
.19

Amendment to Concession for the
    installation and operation of telecommunications services
    granted to Amaritel, S.A. de C.V. by the Secretary of
    Telecommunications and Transport on December 20, 1996, dated
    September 24, 1999 eliminating financial restrictions.

**4
.20

Warrant Agreement, dated March 17,
    2000, between Maxcom Telecomunicaciones, S.A. de C.V. and The
    Bank of New York, acting as warrant agent.

***4
.21

Dark fiber optic purchase
    agreement, dated August 13, 2002, between Maxcom
    Telecomunicaciones, S.A. de C.V. and Bestel S.A. de C.V.

****4
.22

Transactional Lease Termination
    Agreement, dated May 20, 2003, among Maxcom Telecomunicaciones,
    S.A. de C.V. and Jacobo Zaga Romano, Jacobo Zaga Buzali,
    et.al.

****4
.23

Capacity sale agreement, dated ,
    October 15, 2003, between Maxcom Telecomunicaciones, S.A. de
    C.V. and Axtel, S.A. de C.V.

*****4
.24

Credit Agreement, dated April 28,
    2004, by and among Banco Santander Mexicano, S.A.
    Institución de Banca Mútiple Grupo Financiero
    Santander Serfin, as Lender, and Maxcom, as Borrower.

*******4
.25

Credit Agreement, dated April 13,
    2005, by and among Ixe Banco, S.A., Institución de Banca
    Mútiple, Ixe Grupo Financiero., as Lender, and Maxcom, as
    Borrower.

*******4
.26

Amendment, dated August 5, 2004,
    to Exhibit B of the Master Agreement to Supply Local
    Interconnection Services, dated February 25, 1999 between Maxcom
    and Telefonos de Mexico, S.A. de C.V.

******* 107




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##### Table of Contents



4
.27

Credit Agreement, dated April 13,
    2005, by and among Ixe Banco, S.A., Institución de Banca
    Múltiple, Ixe Grupo Financiero, as Lender, and Maxcom, as
    Borrower

4
.28

Credit Agreement, dated October
    25, 2005, by and among Ixe Banco, S.A., Institución de
    Banca Múltiple, Ixe Grupo Financiero, as Lender, Maxcom, as
    Borrower and Maxcom SF, S.A. de C.V. as joint and several
    obligor and amendment dated December 13, 2005

4
.29

Credit Agreement, dated October
    21, 2005, by and among Banco Mercantil del Norte, S.A.,
    Institución de Banca Múltiple, Grupo Financiero
    Banorte, as Lender and Maxcom, as Borrower

4
.30

Irrevocable Trust Agreement, dated
    November 21, 2005, by and among Maxcom, as Settlor, Banco
    Mercantil del Norte, S.A., Institución de Banca
    Múltiple, Grupo Financiero Banorte and Ixe Banco, S.A.,
    Institución de Banca Múltiple, Ixe Grupo Financiero,
    as trust beneficiaries and HSBC México, S.A.,
    Institución de Banca Múltiple, Grupo Financiero HSBC,
    Trust Division, as trustee

4
.31

Maxcom Shareholders Meeting, dated
    August 31, 2005, approving the spin-off

4
.32

Stock Purchase Agreement, dated
    November 22, 2005, by and among Maxcom and Maxcom SF, S.A. de
    C.V., as Sellers and Tiendas Comercial Mexicana, S.A. de C.V.
    and Controladora Comercial Mexicana, S.A. de C.V. , as Buyers.

4
.33

Supply and Installation Agreement
    of Video Through DSL (IPTV) System, dated December 15, 2006, by
    and among Maxcom Telecomunicaciones, S.A. de C.V., Alcatel Bell
    N.V. and Alcatel México, S.A. de C.V.11
.1

Maxcoms Code of Ethics
    adopted March 2006.

12
.1

Certification of the Chief
    Executive Officer pursuant to Rule 13a-14(a).12
.2

Certification of the Chief
    Financial Officer pursuant to Rule  13a-14(a).13
.1

Certification of the Chief
    Executive Officer pursuant to 18 U.S.C. Section 135013
.2

Certification of the Chief
    Financial Officer pursuant to 18 U.S.C. Section 135099
.1

Computation of earnings per share.99
.2

Computation of ratio of earnings
    to fixed charges.     *
    
    Previously filed with annual report on
    Form 20-F,
    submitted to the SEC on July 1, 2002.**
    
    Previously filed with Registration Statement on
    Form F-4
    NO. 333-11910
    submitted on May 5, 2000.***
    
    Previously filed with annual report on
    Form 20-F,
    as amended, submitted on June 29, 2001 and on
    September 28, 2001.****
    
    Previously filed with annual report on
    Form 20-F,
    submitted to the SEC on June 30, 2003.*****
    
    Previously filed with annual report on
    Form 20-F,
    submitted to the SEC on June 29, 2004.******
    
    Previously filed with annual report on
    form 20-F,
    submitted to he SEC on June 30, 2005.
    
    Previously filed with annual report on
    Form 20-F,
    submitted to the SEC on June 30, 2006. 108




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##### Table of Contents



GLOSSARY
    OF TELECOMMUNICATIONS TERMS  ADSL

(Asymetrical Digital Subscriber
    Line) ADSL is a physical-layer protocol that supports up to
    8 Mbps bandwidth downstream and up to 1 Mbps upstream.
    The asymmetrical aspect of ADSL technology makes it ideal for
    Internet browsing, video on demand, and remote LAN access. Users
    of these applications typically download more information than
    they send. ADSL also allows simultaneous voice communication by
    transmitting data signals outside of the voice frequency range.Band

A range of frequencies between two
    defined limits.Bandwidth

The relative range of analog
    frequencies or digital signals that can be passed through a
    transmission medium, such as glass fibers, without distortion.
    The greater the bandwidth, the greater the information carrying
    capacity. Bandwidth is measured in Hertz (analog) or Bits Per
    Second (digital).Capacity

Refers to the ability to transmit
    voice or data over telecommunications networks.Carrier

A licensed provider of
    telecommunications transmission services by fiber, wire or radio.Centrex service

A business telephone service
    developed originally by Lucent Technologies which offers private
    branch exchange type features directly from the local telephone
    company central office, such as voicemail, call
    pick-up
    group, abbreviated dialing and multi-line hunting.Churn

Refers to customer line attrition
    and is measured as the percentage of disconnects from service
    relative to the total subscriber base over a given period of
    time.COFETEL

Comisión Federal de
    Telecomunicaciones, the
    Mexican Federal Telecommunications Commission.Digital

Describes a method of storing,
    processing and transmitting information through the use of
    distinct electronic or optical pulses that represent the binary
    digits 0 and 1. Digital transmission/switching technologies
    employ a sequence of discrete, distinct pulses to represent
    information, as opposed to the continuously variable analog
    signal.DSLAM

Digital Subscriber Line Access
    Multiplexer. A technology to concentrate traffic in ADSL
    implementations through time division multiplexing at the
    central office.E1

A digital telephony format that
    carries data at the rate of 2.048 Mbps (DS-1 level).
    E-1 is the
    European and Latin American version of North American T-1,
    though T-1
    is 1.544 Mbps.Fiber optic technology

Fiber optic systems use
    laser-generated light to transmit voice, data and video in
    digital format through ultra-thin strands of glass. Fiber optic
    systems are characterized by large circuit capacity, good sound
    quality, resistance to external signal interference and direct
    interface to digital switching equipment and digital microwave
    systems. A pair of fiber optic strands using advanced
    transmission technologies is capable of carrying multiple 2.5 or
    10 Gbps communication streams. Because optical signals disperse
    over distance, they must be regenerated/amplified at sites
    located along the fiber optic cable. Fiber optic systems using
    earlier eneration fiber require frequent intervals between
    regeneration/amplifier sites. Greater distances between
    regeneration/amplifier sites afforded by the use of advanced
    fiber generally translate into substantially lower installation
    and operating costs and fewer potential points of failure.Fixed wireless local loop

A wireless local telephony service
    using the 3.4-3.7 GHz frequency band.FTTH

Fiber-to-the-home, reference to an
    all fiber-optic public telephone network design, where broadband
    services are delivered to the customer premises/network
    interface by fiber optic.Gbps

Gigabits per second. A measurement
    of speed for digital signal transmission expressed in billions
    of bits per second (Gbps). 109




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##### Table of Contents



Gulf region

115 cities and towns in
    eleven states in eastern Mexico, which includes the cities of
    Puebla, Tampico, Veracruz, Reynosa, Cancún, Chetumal,
    Mérida, Ciudad del Carmen, Campeche, Coatzacoalcos and
    Tuxtla Gutiérrez, among others.Hertz

The unit measuring the frequency
    with which an alternating electromagnetic signal cycles through
    the zero-value state between lowest and highest states. One
    hertz (abbreviated Hz) equals one cycle per second. KHz
    (kilohertz) stands for thousands of hertz; MHz (megahertz)
    stands for millions of hertz and GHz (gigahertz) stands for
    billions of hertz.ISDN

Integrated Services Digital
    Network. ISDN is an international standard that provides
    end-to-end digital connectivity to support a wide range of
    voice, data and video services.Kbps

Kilobits per second, a measurement
    of speed for digital signal transmission expressed in thousands
    of bits per second.Lambdas

Lambdas are used as the symbol for
    wavelength in lightwave systems. Fiber optic systems may use
    multiple wavelengths of light, with each range of wavelengths
    appearing in a window, roughly corresponding to a
    color in the visible light spectrum.LAN

Local area network, a private data
    communications network linking a variety of data devices, such
    as computer terminals, personal computer terminals, personal
    computers and microcomputers, all housed in a defined building,
    plant or geographic area.Microwave technology

Although limited in capacity
    compared with fiber optic systems, digital microwave systems
    offer an effective and reliable means of transmitting lower
    volume and narrower bandwidths of voice, data and video signals
    over short and intermediate distances. Microwaves are very high
    frequency radio waves that can be reflected, focused and beamed
    in a line-of-sight transmission path. As a result of their
    electro-physical properties, microwaves can be used to transmit
    signals through the air, with relatively little power. To create
    a communications circuit, microwave signals are transmitted
    through a focusing antenna, received by an antenna at the next
    station in the network, then amplified and retransmitted.
    Because microwaves disperse as they travel through the air, this
    transmission process must be repeated at repeater stations,
    which consist of radio equipment, antennae and
    back-up
    power sources, located on average every 30 kilometers along the
    transmission route.Mbps

MegaBits per second. A measurement
    of speed for digital signal transmission expressed in millions
    of bits per second (Mbps).Multi-line hunting

A value-added service that allows
    for multiple calls to be received with a single telephone number.PCS

Personal Communications Services.
    PCS has come to represent two things: first, a digital wireless
    communications service operating over the 1.9 GHz band; and
    second, more generically, a wireless communications service
    utilizing a digital network that offers typical features such as
    voice, video and data applications, short messaging, voicemail,
    caller identification, call conferencing and call forwarding.
    Generic PCS suppliers promote this service on the ability of its
    features to be customized, or bundled, to the needs
    of the individual customers.Point- to-multipoint
    microwave transmission

A transmission using microwave
    technology by which a single signal goes from one origination
    point to many destination points.Point-to-point
    microwave transmission

A transmission using microwave
    technology by which a signal goes from one point to another,
    usually connected by some dedicated transmission line.POTS

Plain Old Telephone Service. The
    basic service supplying standard single line telephones,
    telephone lines and access to the public switched network.Switch

A device that opens or closes
    circuits or selects the paths or circuits to be used for
    transmission of information. Switching is the process of
    interconnecting circuits to form a transmission path between
    users. 110




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Teledensity

Teledensity is a measure of
    telephony service in a population. It is calculated by dividing
    the total subscriber base (number of lines in service) by the
    inhabitants and multiplying by 100. It is generally used as a
    comparative measure of network development. All teledensity
    figures are reported in subscribers per 100 inhabitants.Triple play services

Triple play services consist
    combination of voice, data, and video services offered as a
    bundled service for a price that is less than the price of the
    individual services acquired individually.VoIP

Voice over Internet Protocol
    services consist in the technology that provides telephone
    companies with the ability to carry normal telephony-style voice
    over an Internet Protocol-based Internet with POTS-like
    functionality, reliability, and voice quality.VPN

Virtual Private Network. A network
    design offering the appearance and functionality of a dedicated
    private network.Web-hosting

A service performed by Internet
    service providers (also known as ISPs) and Internet access
    providers (also known as IAPs) consisting in the hosting of
    outside companies web pages to be displayed on the Internet.xDSL

XDSL is a physical-layer protocol
    that supports bandwidth downstream and upstream.  111




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SIGNATURES
  Form 20-F
    By:
    /s/  JOSE
    ANTONIO SOLBES      112